credittoday.co.uk: The return of the 100% mortgage

A private equity-backed lender is set to launch a deal allowing buyers to borrow up to 100% of their property value, provided that the loan is partially guaranteed through a parent, grandparent or legal guardian through a charge on their property.

Aldermore is looking to mitigate its risk by stipulating that part of the loan, reportedly around 25%, is guaranteed by the borrower’s family.

The loans will be offered on a three-year fixed rate of 6.48% through mortgage brokers. It will be open to borrowers across England and Wales to a maximum loan value of £250,000.

Why 100% mortgages were withdrawn

Aldermore is the first British lender to offer 100% mortgages since the financial crisis kicked off back in 2008. Previous high loan-to-value (LTV) mortgages were withdrawn by lenders as property values plummeted which exposed some lenders due to the amount of the mortgage loan exceeding the value of the property.

But is it a good deal?

I have been waiting patiently for the first 100% LTV mortgage lender to appear as in my view property prices have more or less stabilised thus reducing the lenders risk. But frankly I would not offer this to my children, 6.48 % is 13 times the Bank of England base rate!

I might be interested in 4.5% or below, after all the loan is secured on two properties so let’s wait for a few more lenders to show, that with a bit of competition the rate can become a bit more attractive.