Written on May 18, 2023
100% Non-Family Assistance mortgages were last available in 2007 and I think the vast majority of first time buyers who borrowed 100% to purchase their home will be very happy with the way things have turned out for them.
It became almost impossible to get a mortgage with less than 15% deposit for several years from 2009, so FTBs and others who needed 90%, let alone 100% LTV, the mortgage would have been frozen in most cases from purchase for many years if They did not purchase in 2008 or earlier. Hobson’s choice in most cases was to rent or live with the parents for longer than planned.
With home prices falling 20% between fall 2007 and spring 2009, many borrowers have been 100% in negative equity for longer than they initially expected, but against that, if the alternative is rent, they will probably start with mortgage payments that Not much more per month than they would have paid in rent. Then with the bank rate down to 0.5% by March 2009, they will have seen their mortgage payments drop by the time the initial mortgage deal ends (or even during if they have a tracker or discounter), whereas if they still have their rentals it is almost It sure has increased over the years.
Prior to 2008, most new mortgage terms were for 25 years and assuming a 6% interest rate with a paying off mortgage, 10% of the mortgage could have been paid off in the first five years. With home prices rebounding after spring 2009, few 100% mortgage borrowers would be in negative equity after 5 years except for those with interest only mortgages who, even when interest rates fell, chose not to make any payments for the principal.
Although many 100% mortgage buyers will have since used the equity they collected as a deposit to move into their homes, those who have not moved have seen their homes increase in value, according to the Nationwide Index, as follows, depending on when they bought :
- January 2004: 93.2%
- January 2005: 71.6%
- January 2006: 64.3%
- January 2007: 50.3%
The CPI inflation rate from January 2007 to March 2023 (latest figure available) was 59.8% and so on average anyone buying in January 2007 would see the real value of their outstanding mortgage drop by 60% plus make a capital gain on their property of over from 50%. The real value of the remaining debt of previous purchases will have fallen even further, for example since January 2004 the real value of the outstanding mortgage has fallen by 70.0% and the average capital gain has been over 90%.
While past performance is no guarantee of the future, and in particular it’s unlikely that we’ll have another extended period in which the bank rate is below 1%, given all the criticism of past 100% mortgages, it’s interesting to look at. On average to these buyers. It is likely that you have benefited greatly financially.