Negative equity warning
LONDON (Reuters) - The number of 100 percent mortgages has almost doubled in the past six months, despite volatile money markets and signs that house prices are starting to fall, data shows.
People looking to borrow the full value of a property can now choose from 160 products, up from 92 in April, according to online mortgage company mform.co.uk.
A total of 22 lenders offer 100 percent loans, ranging from high street names such as Abbey, Scottish Widows, Standard Life, Bank of Ireland and Cheltenham & Gloucester to regional building societies including the Tipton and Ipswich.
But with firm signs that Britain's property market is coming off the boil, house-hunters without deposits run the risk of negative equity.
Halifax, Britain's largest mortgage lender, said on Thursday that house prices unexpectedly fell last month for the first time since December.
They dipped 0.6 percent in September, down from a downwardly revised 0.3 percent gain in August and well below forecasts for a 0.4 percent increase, its index showed.
Rising interest rates and a global lending squeeze have been expected to weigh on house market sentiment and the latest decline in prices will encourage the view that interest rates could fall in the coming months.
"The rise in the number of 100 percent mortgage products available demonstrates that lenders believe there is a genuine demand," said Francis Ghiloni, marketing and business development director at mform.co.uk.
"However there are indications that the house price boom is slowing, so anyone taking out a 100 percent mortgage is risking being stuck in negative equity; if you add hefty fees to your mortgagee, the risk is increased."
For example, a two-year 100 percent tracker mortgage, with a rate of 6.54 percent and a sum borrowed of 150,000 pounds, would cost 4,954 pounds in fees.
Homeowners who add these to their mortgage would have to rely on house price growth to lift the value of their property above that of the loan secured against it.
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