Nice Loans.co.uk > News > 100% Loans

Loans of 100% or more become rarer

Not so long ago providers were making big profits from lending larger and larger loans to people who were happy to secure all of their property equity and more as a loan guarantee. Loans companies were comfortable in doing this because the countries economy was growing healthily and house prices were rising by around 10% per year. The prospect of people becoming unable to repay their debts, house prices falling and negative equity rearing it's head again was unlikely.

Both loans companies and mortgage companies promoted product ranges that included lending arrangements that allowed customers to borrow up to 125% of their property's value. Another feature was the diligence applied to property valuations. Any form of borrowing that uses a property as security usually requires some form of valuation. In the days of rising house prices these valuations were often done at arms length and sometimes amounted to what was called a drive-by assessment. A property valuer wouldn't even enter the property to look at it in any detail, they'd just drive past and look from the outside. But things have changed due to the prospect of falling property prices. Lenders are now very interested in accurate property valuations before they offer a loan.

Only a few months ago, the choice of deals allowing borrowing of 100% or more of a property's value was quite wide, but the market is contracting rapidly and this week several loan providers announced the end of their 100% plus deals.

By topping up a mortgage with a loan, Alliance and Leicester would allow total loans of 125% of equity, even though the mortgage component made up just 95% of the amount. That deal has been closed down this week, as has Abbey's 125% deal and Coventry Building Society's MOREgage offer.

The reason for all these loans disappearing is a combination of various factors. Loans providers are more risk averse now and unwilling to lend large amounts to people with less than clean credit records (typically the profile of someone asking for such a large sum). The availability of cash within the credit markets is restricted, house prices are predicted to stagnate or start falling and with recession fears on the horizon, higher levels of unemployment could contribute to higher repossession levels.

<<< Return to news page | Request cheaper loans >>>