Following the launch of Yorkshire Building Society’s 1% mortgage product – which could see first-time buyers shell out a £5,000 deposit up to 99% loan-to-value (LTV) for properties up to £500,000 – there has been much discussion regarding the potential merits and pitfalls.
1% or 99% mortgages have made headlines as of late, with Skipton introducing a similar product early last year, and the Government recently toying with introducing a 99% mortgage scheme.
While many young people are unable to afford property at the moment, MPowered Mortgages warned of the potential drawbacks of 1% products.
Amanda Symes-Reeves, product manager at MPowered Mortgages, said: “The 1% deposit aspect of such mortgages is completely pointless as the borrower could find themselves in negative equity should house prices drop.
“At a time when climbing the housing ladder is already a struggle, should we really be saddling first-time buyers with even more debt?
“The risk is that such mortgages will create the next generation of mortgage prisoners.
“We think therefore it is imperative that these mortgages are only available via qualified mortgage advisers.”
