Lenders trying to ‘avoid high-risk borrowers’
Lenders are withdrawing 100 per cent mortgage products because they are worried about being inundated with applications from people with poor credit histories, according to a building society chief executive.
A recent study by personal finance website Moneyfacts.co.uk found that ten lenders have pulled out of the 100 per cent mortgage market in the past six months and that some of the remaining products require the borrower to provide a guarantor.
It suggested that fear of negative equity as house prices begin to fall was behind the move, but Matthew Bullock of Norwich and Peterborough told the Financial Times his building society had lowered its maximum loan-to-value on mortgages because it wanted to avoid the cost of processing lots of failed applications.
"Anyone out there with a 100 per cent offering will get all the worst propositions coming to them - you'll get all the rubbish," explained Mr Bullock. "They wouldn't get through our filters, but we'd still have to process them."
Meanwhile, a report by Capital Economics has suggested that some lenders have put up tracker rates and maintained high rates on fixed-rate deals in order to deter higher risk borrowers, such as those who need a poor credit mortgage.
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