Six in ten Independent Financial Advisers (IFAs) are concerned 100% mortgages could create a repayment crisis according to research by Opinium.
The insights agency revealed that nearly two-thirds of IFAs (66%) who receive mortgage requests are concerned about the risks associated with 100% mortgages.
Over three fifths of IFAs (63%) worry about 100% mortgages because of the heightened risk of negative equity. Similarly, 61% are concerned that 100% mortgages could create a mortgage repayment crisis in the events rates go up.
In the last month, one in eight (12%) IFAs have seen an increase in enquiries about 100% mortgages, as well as an increase in enquiries about mortgages that use rental payments as part of their affordability checks (13%).
A third (35%) of IFAs that receive mortgage requests think 100% mortgages are a good idea, however, despite this 32% IFAs wouldn’t recommend 100% mortgages to their clients, and over a third (38%) wouldn’t recommend 100% mortgages to their family, friends or loved ones either.
Alexa Nightingale, Head of Financial Services research at Opinium said “It is no doubt that 100% mortgages are likely to help first-time buyers get their feet on the property ladder, and the thinking behind using rental payments as part of affordability checks could no doubt be helpful for those who have only ever rented. However, with recent warnings from experts such as Andrew Bailey, governor of the Bank of England, that buyers and banks need to be ‘very careful’ with these types of deals, it’s clear that it’s important to keep the potential risks in mind when considering this type of mortgage. IFAs will no doubt need to spend time ensuring their clients are up to speed on the possible pitfalls, such as negative equity, and the potential impact of further interest rate rises on their mortgage repayments.”