Critics round on the 130% home loan

A new mortgage from Bradford & Bingley that allows homebuyers to borrow 30 per cent more than their property's value met with widespread criticism this week.

A new mortgage from Bradford & Bingley that allows homebuyers to borrow 30 per cent more than their property's value met with widespread criticism this week.

Launched by its specialist lending arm, Mortgage Express, the "Max 130" loan aims to help first-time buyers to grab the first rung of the property ladder while using some of the loan to buy furniture, say. It is also open to existing homeowners looking to remortgage and consolidate credit card and other debts into a single loan.

But the deal, which comes at a fixed rate of 6.49 per cent over three years, has been attacked by mortgage specialists, MPs and consumer groups, amid accusations of irresponsible lending.

"Borrowers are plunged into negative equity from the outset," warns David Hollingworth of mortgage broker London & Country. This might pay off in a rising market but has serious repercussions when property prices go down, he adds. "Given that house prices are flattening, you could be looking at trouble further down the line."

A spokesman for Mortgage Express insisted it was a responsible lender and said applicants would have to meet strict criteria.

But if you borrow 30 per cent more than the value of your home, it could be years before your property is worth more than your mortgage and rises out of negative equity, says Simon Tyler from broker Chase de Vere Mortgage Management.

Mr Hollingworth says the rate is not particularly competitive. He also warns those considering the loan for debt consolidation that this will only alleviate the problem in the short term. Consolidation lengthens the time over which a loan is repaid, making it more expensive in the long run.

Other lenders let homeowners borrow more than the value of the property. Northern Rock, for example, offers loans of up to 125 per cent, but unlike Mortgage Express, it does not secure all of the loan loan on the property.

"With Northern Rock, borrowers are only offered up to 95 per cent secured on the property, with a further 30 per cent unsecured, like a personal loan," says Mr Tyler. If borrowers run into trouble, they can concentrate on mortgage payments and can let the unsecured element go into arrears temporarily. This won't so easily lead to a repossession and makes these loans a little less risky.

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Guru Careers: Tax Manager / Accountant

    £35 - £50k DOE: Guru Careers: A Tax Manager / Accountant (ACA / CA / CTA) is n...

    Ashdown Group: Contracts Executive - City of London

    £35000 - £37000 per annum + benefits: Ashdown Group: Contracts Executive - Cit...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45K: SThree: SThree Group have been well esta...

    Recruitment Genius: Call Centre Debt Collector - Multiple Roles

    £21000 per annum: Recruitment Genius: This is an exciting opportunity to join ...

    Day In a Page

    Giants Club: After wholesale butchery of Idi Amin's regime, Uganda’s giants flourish once again

    Uganda's giants are flourishing once again

    After the wholesale butchery of Idi Amin's regime, elephant populations are finally recovering
    The London: After 350 years, the riddle of Britain's exploding fleet is finally solved

    After 350 years, the riddle of Britain's exploding fleet is finally solved

    Archaeologists will recover a crucial item from the wreck of the London which could help shed more light on what happened in the vessel's final seconds
    Airbus has patented a jet that could fly from London to New York in one hour

    Airbus has patented a jet that could fly from London to New York in one hour

    The invention involves turbojets and ramjets - a type of jet engine - and a rocket motor
    Tate Sensorium: New exhibition at Tate Britain invites art lovers to taste, smell and hear art

    Tate Sensorium

    New exhibition at Tate Britain invites art lovers to taste, smell and hear art
    10 best sun creams for kids

    10 best sun creams for kids

    Protect delicate and sensitive skin with products specially formulated for little ones
    Ashes 2015: Nice guy Steven Finn is making up for lost time – and quickly

    Nice guy Finn is making up for lost time – and quickly

    He was man-of-the-match in the third Test following his recall to the England side
    Ashes 2015: Remember Ashton Agar? The No 11 that nearly toppled England

    Remember Ashton Agar?

    The No 11 that nearly toppled England
    Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

    US betrayal of old ally brings limited reward

    Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
    VIPs gather for opening of second Suez Canal - but doubts linger over security

    'A gift from Egypt to the rest of the world'

    VIPs gather for opening of second Suez Canal - but is it really needed?
    Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

    Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

    Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
    The male menopause and intimations of mortality

    Aches, pains and an inkling of mortality

    So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
    Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

    'How can I possibly be on the list with these writers I have idolised?'

    Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
    Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

    Bettany Hughes interview

    The historian on how Socrates would have solved Greece's problems
    Art of the state: Pyongyang propaganda posters to be exhibited in China

    Art of the state

    Pyongyang propaganda posters to be exhibited in China
    Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

    Vegetarian food gets a makeover

    Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks