125% mortgages - not quite what they seem - Loans - News - Moneyfacts


125% mortgages - not quite what they seem

125% mortgages - not quite what they seem

Category: Loans

Updated: 31/10/2008
First Published: 06/12/2007

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Despite the continuing tightening of lending criteria in the mortgage market, especially on riskier loans, five mortgage lenders are still offering the much talked about 125% mortgages.

However 125% loan to values may not be quite what they seem. Mortgage lenders have put such tight restrictions on them that only in very specific circumstances can a mortgage borrower will get the full 125% loan.

For example Abbey,Alliance and Leicester and Coventry will restrict the extra loan, secured or unsecured to a maximum of £25K. Effectively this means that the property can only be worth a maximum of £100K to achieve a 125% loan.

This week Northern Rock placed further restrictions to some of its Together range mortgage products. On the lower rate mortgage deals, the unsecured loan is limited to a maximum of 30% or £10K. In these circumstances, the property would have to be worth a maximum of £33K in order for the borrower to get the full 125%. A 30% or £30K loan is still available but at a 0.20% higher rate.

At a time when the housing market is showing signs of a slowdown, it is especially important that borrowers take full consideration of what borrowing more than the current value of their property could mean for them in the future.

Mortgage best buys - 100% mortgages

Mortgage best buys - First time buyers

Mortgage best buys - Fixed rate mortgages

Mortgage best buys - Variable rate mortgages

Mortgage best buys - Discounted variable rate mortgages

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

Related Articles

Get a record low rate loan - if you qualify

Competition in the personal loans market is as hot as ever, so much so that one loan provider has slashed rates to the lowest on record – but only to those who fit the bill. The shopping bill, that is…

Competition returns to loans, but stalls in cards

Our recent figures reveal a mixed picture in terms of unsecured lending, as while competition appears to have returned to the loans market, it’s notably slowed in the credit card sector.

How to improve your credit score

Are you thinking about applying for credit? If so, you need to make sure your credit score is in order.