Six out of 10 financial advisers are concerned that the re-emergence of 100% mortgages could spark a repayment crisis for borrowers and leave some in negative equity.
The research — taken among IFAs who receive mortgage requests — suggests disquiet about this latest market development. The biggest concern is the heightened risk of negative equity, cited by 63% of respondents. Meanwhile, 61% of these advisers said this could cause a repayment crisis if rates go up.
However the research, conducted by research agency Opinium, found that there was growing demand for these products, with 12% of IFAs seeing an increase in enquiries about deposit-free mortgages over the past month, and 13% seeing an increase in queries about mortgages that use rental payment history as part of the affordability check.
The research found that a third (35%) of IFAs said these mortgages were a good idea. However a similar proportion (32%) said they would not recommend these products to clients, while an ever higher percentage (38%) said they wouldn’t recommend them to family or friends either.
Opinium head of financial services Alexa Nightingale says: “It is no doubt that 100% mortgages are likely to help first-time buyers get their feet on the property ladder.
“However, with recent warnings from Andrew Bailey, governor of the Bank of England, that buyers and banks need to be ‘very careful’ with these types of deals, it’s clear that it’s important to keep the potential risks in mind when considering this type of mortgage.”
