Debt campaigners criticise "dangerous" 125% mortgage

Posted: 07 Nov 2006 11:18:20 GMT

Debt campaigners and financial advisors have criticised a HBOS plan to offer mortgages at 125 per cent of property value

Debt campaigners and financial advisors have criticised a HBOS plan to offer mortgages at 125 per cent of property value.

The instant negative-equity deal has been designed to also cover stamp duty and furniture when purchasing a property but prompted warnings about loan affordability.

The plans have been revealed just 24-hours after court figures showed a 15 per cent rise in the number of repossession orders issued over the summer.

Interest rates are expected to rise this week and many experts predict that they will rise again in the new year, further stretching the finances of recent home-buyers.

"I think people who are choosing these types of mortgages are taking on dangerous levels of debt," Andrew Hagger of Moneyfacts told the Evening Standard.

"I would not recommend anyone to take one out because it is a very high risk strategy.

"How long are they going to have to wait before the value of their home catches up with the size of their mortgage?"

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