According to a survey from Opinium, based on responses from 202 financial advisers, around 63 per cent are worried about the risk of negative equity and up to 61 per cent are concerned that deposit-free mortgages could create a repayment crisis if rates increase.
Last week, Skipton Building Society introduced a 100 per cent LTV mortgage aimed at renters, with brokers saying that the product could help a specific cohort of first-time buyers and was a “step in the right direction”.
Around 12 per cent of advisers surveyed said they had seen a rise in enquiries about 100 per cent LTV mortgages, and 13 per cent reported an uptick in queries about using rental payments as part of affordability checks more widely.
Over a third of IFAs that receive mortgage requests said they thought 100 per cent LTV mortgages were a good idea, but 32 per cent said they would not recommend them to their clients.
Approximately 38 per cent of would not recommend them to friends, family or loved ones.
Alexa Nightingale, head of financial services research at Opinium, said: “It is no doubt that 100 per cent LTV mortgages are likely to help first-time buyers get their feet on the property ladder, and the thinking behind using rental payments as part of affordability checks could no doubt be helpful for those who have only ever rented.
“However, with recent warnings from experts such as Andrew Bailey, governor of the Bank of England, that buyers and banks need to be ‘very careful’ with these types of deals, it’s clear that it’s important to keep the potential risks in mind when considering this type of mortgage.”
She added: “IFAs will no doubt need to spend time ensuring their clients are up to speed on the possible pitfalls, such as negative equity, and the potential impact of further interest rate rises on their mortgage repayments.”
