At a testing time within the mortgage market when a number of lenders offering light or heavy adverse mortgage products have been forced to either withdraw or revise their ranges, Abbey has pushed ahead with the launch of 125 per cent mortgages for borrowers.
An Abbey spokesperson said: "We are currently piloting a 100 per cent LTV plus product in our branches and through key brokers. Since Abbey has strong risk experience in the mortgage markets and is responsible in its approach, we thought it prudent to run this as a pilot scheme only.
"The product is a 100 per cent loan to value mortgage plus a secured loan of up to £25,000, dependant on individual circumstances. We will assess whether it becomes a permanent part of our portfolio going forward once we have tested this in the marketplace."
London and Country are one of the brokers Abbey has chosen to pilot the new scheme.
It is likely that these products will appeal to first-time buyers who are thought to be the unfortunate casualty of the current credit crunch as lenders lower their maximum loan to value (LTV) percentages and increase their rates.
Julia Harris, mortgage expert at Moneyfacts.co.uk, believes Abbey's timing is surprising due to Northern Rock's plight: "Abbey joins only Alliance & Leicester, Birmingham Midshires Solutions, Coventry BS (Godiva Mortgages) and Northern Rock to offer 125% loan to value products, but is unique in the fact that the full 125% is secured borrowing. The maximum secured loan was previously 115% from Accord Mortgages (for professionals only) or from Yorkshire BS.
"Abbey offers a range of fixed rate deals at 125% LTV with a variety of fee and rate combinations to choose from.
Harris warned: “Borrowers should remember they are starting their mortgage effectively in negative equity, requiring over 25% growth in the property market before they can see any equity in their property.
“While prices continue to rise, especially at the pace we have seen over the last few years these can soon be recouped, but it is unlikely that such a growth rate is sustainable."
