Abbey’s 125% mortgage offer not appropriate
June 15, 2008
High street lender, the Abbey, is being criticised by many industry experts after announcing the launch of a 125% mortgage, which is being made available to first time buyers along with other groups. Experts claim that this mortgage deal comes at a bad time, when severe difficulties and chaos have hit the financial markets. Whilst many other lenders are cutting back on their mortgage offerings, the Abbey is allowing some consumers to borrow over and above the value of the home in a 125% mortgage deal.
According to many experts consumers that take out these loans could find that they are locked into negative equity in the event that they default on repayments. In addition, a slowdown in the housing market marked by a fall in house prices and property values could also see many homeowners that take out a 125% mortgage fall quickly into negative equity, where the property will actually be worth less than the amount that they owe on their mortgage loan.
Under the new Abbey mortgage deal borrowers that qualify will be able to borrow 100% of the value of the property plus an additional £25,000 on top. As a result of this mortgage deal the Abbey is being accused of irresponsible lending, with many experts stating that the bank has ignored calls from the government for lenders to act more responsibly, particularly after the recent chaos with Northern Rock.
One official from a debt charity stated that consumers that opt for this mortgage would have to be ‘incredibly bold or incredibly stupid’, adding that the mortgage deal poses severe potential problems in terms of huge debts and the possibility of negative equity.
Recent additions:
- Many worried about effects of expiring fixed rate deals
- Interest rates could fall twice by June
- Most repossessions involve sub-prime lenders
- Cheap fixed rate homeowners see light at end of tunnel
- Are discount mortgages a good choice? From fixed rate mortgages to a tracker mortgage, and from interest only mortgages to buy to let mortgages, the world of mortgage loans has become more complex than ever these days, with a wide range
- October 2007 saw homeowners struggle with mortgage payments Mortgage payers in the UK encountered a difficult month in October when it came to making mortgage repayments according to recent data from the Council of Mortgage Lenders. High interest rates and property prices, coupled
- Consumers reluctant to switch mortgage lender A recent report has shown that many UK homeowners are reluctant to switch their mortgage lender, even in cases where their existing mortgage becomes difficult to afford. The data shows that even where borrowers have
- DWP loses sensitive information There has recently been another blunder, with yet another government agency losing sensitive data about consumers. The Department for Work and Pensions has admitted that it has lost hundreds of budgeting loan application forms, each
- Borrowers getting fleeced on fees It seems that the average borrower looking for a mortgage simply cannot win these days. Even though house prices are coming down, which should have been good news for first time buyers looking to get
Comments
Got something to say?