This makes it a surprising time for Abbey to announce a range of products designed for borrowers looking to finance up to 125 per cent of their property value.
Abbey joins only Alliance & Leicester, Birmingham Midshires Solutions, Coventry BS (Godiva Mortgages) and Northern Rock to offer 125 per cent loan to value products, but is unique in the fact that the full 125 per cent is secured borrowing.
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The maximum secured loan was previously 115 per cent from Accord Mortgages (for professionals only) or from Yorkshire BS.
Julia Harris, Mortgage Expert at Moneyfacts.co.uk – the money search engine, said: “The extra money these loans can provide borrowers can be a lifeline in helping borrowers get on the property ladder, providing vital cash for stamp duty, legal fees and even essential home improvements.
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But borrowers should remember they are starting their mortgage effectively in negative equity, requiring over 25 per cent growth in the property market before they can see any equity in their property. While prices continue to rise, especially at the pace we have seen over the last few years these can soon be recouped, but it is unlikely that such a growth rate is sustainable.
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These loans can be a perfect solution for some borrowers, but should be taken with a wealth warning. Their success relies on an increasing property market. Borrowers should not forget they are spreading the cost of their additional borrowing over a long period of time and therefore accumulating a hefty interest bill.”
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