Lenders widen 100 per cent choice

The number of 100 per cent mortgage products now available direct from a lender has increased by 70 per cent over the last six months with 160 products now on offer.

However, the number of lenders offering 100 per cent loans direct has remained steady at 22. They range from major firms such as Abbey and Cheltenham & Gloucester to smaller regional building societies such as Tipton and Ipswich.

The majority of 100 per cent loans are two or three-year fixed or tracker deals which account for 97 of those available. However mform.co.uk is urging borrowers who do not have deposits to think carefully when taking out 100 per cent mortgages as they risk negative equity if the housing market cools down.

Francis Ghiloni, mform.co.uk marketing and business development director, said: “The rise in the number of 100 per cent mortgage products available demonstrates that lenders believe there is a genuine demand.

"Borrowers need to be wary when taking 100 per cent mortgages and look carefully at the true cost of the loan including any fees. Adding fees to the loan is a gamble on house prices continuing to rise. First-time buyers just can’t win. If house prices keep rising they have to take the risk of 100 per cent mortgages but if house prices fall and they take 100 per cent mortgages they face negative equity.

The most competitive two-year 100 per cent mortgage on a true cost basis is from Ipswich Building Society - a discount variable loan at 5.99 per cent.