Legal & General's Mortgage Club has unveiled a fixed rate mortgage that allows advances of 100 per cent of valuation.
The mortgage is fixed at 6.40 per cent until September 1, 2004 and if borrowers redeem more than 10 per cent a year during this period, they must pay an early redemption penalty. In year one, 4 per cent of the loan is payable, in year two this is reduced to 3 per cent and in year three, 2 per cent is charged.
The maximum loan is £250,000 for professionals and £150,000 for other borrowers.
Research from the Council of Mortgage Lenders in June 2001 shows that 100 per cent mortgages are a small part of the market. They take just 4-5 per cent of the market, compared to 25 per cent in the late 1980s and early 1990s.
In 2000, 7 per cent of first-time buyers and 1.5 per cent of existing borrowers took out 100 per cent loans. This is lower than the national average of 8 per cent for first time buyers and 2 per cent for existing homeowners.
According to Moneyfacts on July 5, 2001, the Legal & General mortgage is the only mortgage of this type that is available to first-time buyers and existing borrowers. Leeds & Holbeck has a similar mortgage that is fixed at 6.95 per cent until September 1, 2004 and the maximum loan for all borrowers is £150,000.