100 Per Cent Loan To Value Product Launched
The home owner loan market in the UK is still reeling from the effects of the credit crunch and it looks as though this will continue for some time yet, with banks and building societies still taking a cautious approach towards offering loans.
Despite this trend, the Danish backed lender, Northern Bank has just announced that it is to launch a home owner loan product which offers a loan to value of 100 per cent, even though many experts believe that it was this type of high loan to value loan deal which was the cause of the credit crunch in the first place.
In its Mortgage Market Review (MMR), the Financial Services Authority (FSA) has already proposed a ban on 100 per cent loan to value home owner loan products, as well as a cap on income multiples of three and a half times salary, in order to promote responsible lending.
The new loan product will only be available to first time buyers who live in Northern Ireland who are in full time employment and have their salary paid directly into the Northern Bank.
Robert Sinclair of the Association of Mortgage Intermediaries supported the new loan product, he said “Loan to value is not a great determinant of risk, but is an indicator. It is more important that the loan is affordable.”
“I have always said that if a mortgage is affordable, if genuinely the loan affordability is right, a 100 per cent mortgage is not a problem.”
A spokesman for Northern Bank said “Our strategy during the past number of years has remained unchanged. We have consistently offered mortgages based on customer’s ability to pay, so we have been able to provide our 100 per cent loan to value mortgage products throughout the housing downturn.”
