Copy article

Story for The Times: What happened to the old 100% mortgage borrowers?

Journalist: George Nixon, The Times and The Sunday Times

ended 01. May 2023

Hello, one for an older generation of brokers and advisers, this! We have been discussing the old pre-2008 days when you would regularly get banks that did 100% or even higher, not just Northern Rock but Lloyds, NatWest, Abbey National, these loans were pretty widely available.

We're trying to find some of those 100% borrowers, and what happened to them, did they 'win,' as it were, with house price growth and lower interest rates later, or lose because they needed to sell or remortgage at the wrong time? 

It's worth noting we're not after mortgage prisoners per se, which is a separate issue I think, but people who took out these high LTV loans with banks that didn't go bust. Can anyone help, please, thanks!

6 responses from the Newspage community

Copy all

Copy

Editor
Craig FishVerified
Director at Lodestone Mortgages
I've got a client happy to talk with you George if you'd like to get in touch directly.
Copy

Editor
Samuel Mather-HolgateVerified
Independent Financial Adviser at Mather and Murray Financial
Many 100% mortgagees will be relieved to find themselves in a good position now, due to the increase in house prices over the last 15 years. However, some of these properties haven't seen any growth over that period as they were marketed to naive buy to let investors at high prices where 'no-money-down' was an option. Typically a 2-bed flat in Machester is worth the same as it was in 2008, and if you were on a 100-120% loan you wouldn't have had much option to change providers.
Copy

Rhys SchofieldVerified
Brand Director at Peak Mortgages and Protection
Seeing as average house prices have gone up from £185,782 in Jan '08 to £292,118 in July 2022 those 100% mortgages certainly seem in the main to have been a great investment with more winners than losers.

Sadly 100% mortgages caught a lot of the flak from the financial meltdown that was actually a ridiculously risky sub-prime mortgage market which was a largely unconnected issue to good quality 100% LTV lending.

It was never the 100% LTV mortgages that were the problem, it was what banks did with the debts and the fact that mortgages were given out like sweets to people without the capacity to pay for them.

If anyone wants a bit of hometime viewing I'd suggest watching 'The Big Short' because Margot Robbie explaining the origins of the credit crunch in a bubblebath does a better job than me!
Copy

Scott Taylor-Barr0
Principal Adviser at Barnsdale Financial Management
We purchased our first home with a 100% mortgage from Sainsbury's Bank (Bank of Scotland under a different name) for £87500 in 1999, the same year we got married, and then sold it for £129950 in 2002. Even back then we'd have struggled to save for a deposit at the same time as saving for a wedding, so we'd have had to remain renting for years longer, which may also have meant we'd have delayed having kids and starting our family too. It's quite strange to think of all the different twists and turns life could have taken, just because of the availability of a 100% mortgage product. Now that property prices have risen so much, vastly outstripping the rise in people's wages, the dream of homeownership is further away than ever - in January 2023 the ONS reported the average house price was £290000 in the UK, so just a 5% deposit is a whopping £14500, even before the other costs and fees of buying a home are factored in.
Copy

Gary Bush0
Financial Adviser at MortgageShop.com
A very interesting topic - we still to this day balk at the media blame for the 2008 crash coming from 100% mortgages in the UK, it simply didn't cause this crash. Financial institutions purchasing dubious mortgage books seem to be the start of this crash, yes some of them contained 100% mortgages but the majority were US banks lending to people who had never had a job being granted many times their fictitious incomes, and guess what they failed to pay. UK 100% mortgages have put many thousands of people on the property market and making some serious equity leaps for themselves over time. One particular example I can quote is a single guy in the late 90's with no deposit who we obtained a mortgage through the then Mortgage Express lender at 100%. He sadly died, 2021, but left an estate of near on £2,000,000 to his beneficiaries through subsequent property transactions that he undertook all made possible from those early beginnings when he had no deposit funding at all.
Copy

Matthew JacksonVerified
Director at Mint FS
Purchasing a property with no deposit or a small deposit is all about timing - not necessarily when you buy, but when you sell. Negative equity only really exists if you are selling your property - if you are happy in your home it only exists on paper.

For a large number of clients who used 100% mortgages historically they would have moved at a time where the property had increased sufficiently to give them a deposit for their next purchases.

Typically in any decade since the 1900's property prices have doubled and this has only slowed in recent times, so 100% mortgages are no where near as risky as they might be perceived to be.