Banks that offered cheap unsecured loans in addition to a regular mortgage are still finding that they are in big trouble in many cases. The popularity of the 125% mortgage which contained a cheap unsecured loan in addition to loaning on the actual property has been blamed for much of the current crisis. As a result, fewer banks are now willing to offer cheap unsecured loans at all and it may be years before the property market can support a return to 125% loans, if they ever come back at all.
“Fixed-rate mortgages have recently dominated the market as borrowers prized security and certainty above everything else and lenders offered competitive deals,” said Francis Ghiloni, mform business development director.
“However, the cost of security appears to be excessive and fixed rates are now uncompetitive across the board for most product areas. Even SVRs can be more competitive on a true cost basis.”
David Hollingworth of London and Country added, ‘If you are facing higher mortgage repayment, extending the term of the mortgage will reduce them but will increase overall costs dramatically. It should be treated as more of a last resort.’
Related reading: Cheap Unsecured Loan
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