Fashion flashback - a 100% mortgage

Abbey National is going all the way in a bid to revive the home loan market. Nic Cicutti reports
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The Independent Online
FLARED trousers, platform shoes and the tank-top have all had their comebacks in recent years. Last week it was the turn of another throwback to the 1970s and 1980s - the 100 per cent mortgage.

In a bid to breathe new life into a comatose mortgage market, Abbey National announced that it was bringing back the 100 per cent home loan for the first time since 1989.

The bank's offer comes as figures from the Halifax last week showed that house prices fell by a further 0.2 per cent in March, with the market showing an overall decline of 1.5 per cent over the past 12 months.

A separate survey for TSB showed that the real cost of home buying, based on the percentage of take-home pay needed to cover a typical mortgage, has drop-ped for the first time in a year.

The offer from Abbey National, Britain's second largest mortgage lender, is aimed at those who want to move out of their present homes but are trapped by falling house prices.

They will now be able to borrow up to the maximum valuation or purchase price of their new property if they so need. Charles Toner, the bank's retail division managing director, said: "We are committed to helping those who are having problems moving because of low or negative equity."

But Abbey National's 100 per cent offer is not as generous as its last one - first-time buyers are excluded.

Borrowers also have to pay an additional fee, similar to a mortgage indemnity guarantee, based on 25 per cent of any loan above 75 per cent of the purchase price or valuation. On a £60,000 mortgage, a borrower would have to find £1,500 for a 100 per cent mortgage. This is taken from the loan itself, leaving the buyer to make up the difference.

John Charcol, the mortgage broker, has negotiated a 100 per cent mortgage from Bradford & Bingley, with a 12-month discount that reduces the interest rate to 4.83 per cent.

Mortgage indemnity is added to the loan - allowing borrowers the full amount - but insurance on both buildings and contents is obligatory.