HBOS offers 125% Loans to Professionals
Many professionals starting out at the beginning of their career will be all too aware of the time it takes for their career to start paying them dividends. Many of those in the country’s highest paid professions start out their careers on comparatively low salaries, as well as being straddled with the debts of years of study.
This fact has not been lost on HBOS, Britain’s largest mortgage lender which announced on the thirteenth of November that it will be launching a new mortgage lending up to 125% of the price of a new home to such cash strapped professionals.
It is expected that the loans will be used to help get young professionals onto the property ladder while also leaving them with enough cash to pay their stamp duty, legal fees and pay for furniture and improvements for their new homes.
Some however, fear that such large loans will make it ever more difficult to keep up with repayments and say that repossessions will increase as a result of such lending policies. A spokesperson for the Citizens Advice Bureau said that such mortgages could mean as much as half of a borrower’s monthly income will go towards mortgage payments and that such borrowers will be extremely vulnerable to increases in interest rates.
The new loans will only be offered through independent mortgage advisors and will not be offered in the banks branches. The bank has also said that it will operate extremely stringent criteria to ensure that only those borrowers who will be able to afford the products will be able to take them out. According to the bank this mortgage is a “niche product” and will only be targeted at appropriate customers.
The loan will require a 5% deposit on the cost of the home. Borrowers will then be able to borrow 95% of the house price on a secured basis, with a further 25% being offered as an unsecured loan. Both loans will be repaid in a single monthly payment.
Many have also criticised the high rates of the new loans, which vary depending on the type of loan offered. Customers opting for a two year fixed rate will pay 5.89% for the first two years, which will revert to 7.09% thereafter. Many customers would be better served opting for a traditional loan and then seeking unsecured finance from more traditional sources at a lower rate.