Number of mega-mortgages available slashed

Following recent action taken by a number of lenders the number of mega-mortgages available on the market has been slashed, fuelling concerns that those with 125% mortgages who wish to remortgage could suffer real problems. A number of major lenders, including the Alliance and Leicester, Northern Rock, and the Abbey, have announced that they will not be offering 125% mortgages any longer, and the number of lenders offering even 100% mortgages has also fallen.

One official stated: “With so many prominent lenders exiting the 100%-plus mortgage market this week, consumer confidence is going to be knocked again. First-time buyers will be hit hardest, with repayments likely to shoot up when they come to remortgage. At a time when consumer confidence is so low, it is disappointing that lenders are adding to the panic.”

Those with 125% mortgages have their loans broken down into a 95% secured mortgage and a 30% unsecured loan. When they come to remortgage most will only be able to refinance the 95% secured part of the loan, and will suffer the consequences of being classed as having a large unsecured loan into the bargain.

Northern Rock, which was recently nationalised, has also announced that it will not be offering these mortgages.

One industry professional said: “Some of those customers who don’t fit standard lending criteria - the kind of borrower Northern Rock was happy to take on before the crisis began - are likely to have many doors shut in their faces by other lenders in the current economic climate.”

A Northern Rock spokesperson said: “Our present lending appetite has changed. And demand for this product has now fallen to negligible levels, so we are withdrawing it.”

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