Five Questions About: 90 per cent mortgages

Can I get a 90% mortgage?

Before the Credit Crunch, you could get a mortgage with no deposit. Those days are over and in many instances a deposit of at least 25% is required. In recent months we've seen an increase in 90% mortgages and this week Northern Rock announced a new range of products designed to help first-time buyers.

Is this good news?

Many experts have been calling for more lenders to offer mortgages to those with small deposits, in an attempt to inject competition back into this part of the market. The rates on 90% loans are significantly higher than those on lower loan-to-value products.

Why was the Northern Rock announcement significant?

Before nationalisation, Northern Rock had a mortgage called Together, that let people borrow up to 125% of value. This came back to haunt it, with a higher proportion of its borrowers in arrears than more cautious lenders. The ongoing shortage of 90% mortgages shows some are still nervous about this lending level.

Is a 90% mortgage risky?

The main risk is that if prices fall the amount you owe on your mortgage may exceed the value of your home. If you can still afford your mortgage repayments it should cause problems only if you want to move or remortgage.

What are the benefits of having a larger deposit?

The bigger your deposit, the greater the cushion to protect against falling prices. And while we have seen an increase in the number of 90% mortgages over the past year, the most competitive rates are still restricted to those with larger deposits.

The cheapest 90% mortgage is a lifetime tracker from HSBC at 4.29% with an arrangement fee of £99. However, if you have a 40% deposit, HSBC a lifetime tracker at just 2.29%, with a £99 fee.

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