Abbey has declared it is to offer a 125% mortgage deal. An odd time to be offering such a deal in the present financial climate. In effect the borrower will be getting a 100% mortgage with an additional 25% secured loan, depending on their individual financial situation.
It is thought this will appeal to many first-time buyers, but be warned, the borrower will effectively be starting off in negative equity, the property will need to gain an extra 25% in value before the house will be in equity. This may not have been a problem over the past couple of years, however the continuation of rocketing property values cannot be relied upon as it is not likely to be sustainable in the long term.
Is this is a brave move for Abbey or a foolish one? Only time will tell.
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