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125% Mortgages - Going Going Gone

In the past 7 days 4 leanders have pulled their products where they will lend more that the value of the home being purchased. The 100% plus mortgages were often set up a means to help first time buyers onto the property market and have been popular in recent years. The loans work well in a rising propoerty market as the equity gained in the home quickly cover the amount being lent by the lender. As the property market slows though and as house prices become static or even drop in some cases lender have become increasing concerned that borrowers may bot be able to afford repayments and with them potentially slipping into neative equite many lender have got cold feet.

Typically the deal are set up so that 95% of the loan is secured against the property with the remaining amount given as a personal loan to the home owner. Alliance and Leicester pulled their 125% deal on Tuesday with Coventry stopping their product today. Abbey and Godiva are the other 2 lenders who have now taken the step of removing these high loan to value products.

There is speculation in the market that other lender may follow suit with Abbey and northern rock both set to review the situation this week.

22 Febuary 08

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