Rise of plus size mortgages should mean costs come down

Commenting on the news that more and more homebuyers are taking out 100 per cent mortgages, Ray Boulger, senior technical manager at independent mortgage broker John Charcol, said:

“As the proportion of people going to university has grown over the last few years, as indeed has the level of fees that they pay, we have seen a new generation of young people starting their working lives much later, often saddled with thousands of pounds worth of debt. Faced with the choice of either delaying a house purchase until the debt has been paid off and a new savings pot accumulated, or taking the plunge earlier with the aid of 100% plus home loans, it is unsurprising that greater numbers have more recently chosen the latter.

“Despite the furore surrounding the availability of mortgages reaching as much as 125 or 130 per cent of a property’s value, in actual fact, very few people qualify for that amount of money and the average plus size loan to value is more like 103 per cent.

“As well as Alliance & Leicester announcing their plans for a ‘Plus Mortgage’ of up to 125 per cent, we know of several other lenders who are likely to be launching 100 per cent products this year. The good news for borrowers here is that as competition increases, the premiums usually associated with these kinds of mortgages should be reduced and I would expect to see the cost of borrowing 100 per cent or more to come down by the year end.”