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Sheffield woman’s warning as 100 per cent mortgage left her with ‘almost nothing’
A Sheffield woman has warned about the ‘dangers’ of 100 per cent mortgages after her dream first property left her with ‘almost nothing’.
Becky Stevenson had been excited to finally move out of her parents’ and buy her first home at the age of 21. She was in full-time work and paid £100 a month board to her mum and dad, so she was able to put aside some of her earnings each month.
The property she found was a £72,000 Sheffield terrace and in 2003 she and her then-partner had saved up more than £10,000 for a deposit. They were surprised to find that an in-house mortgage advisor told them not to use the cash on a deposit at all, reports The Mirror.
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The pair were talked into buying the home with a 100 per cent mortgage and, as a young and naïve first-time buyer as she puts it, Becky agreed. The couple blew their more than 10 per cent deposit on a holiday to Mexico and bought new furniture.
Looking back, amid a new 100% mortgage being launched by Skipton Building Society, the 41-year-old thinks it was a ‘terrible idea’ when she took one from a different firm years ago when they were first on the market. She wants to warn other potential buyers about the risks of these types of mortgages.
Becky said: “We clearly said ‘we have these savings’ and they were like ‘oh did you know…’ kinda selling it as this amazing thing. We didn’t know about all the impacts of that – not getting the best rates, high monthly payments.
“They did take advantage of our naivety, which is really sad… it was absolutely terrible. That’s what I fear for first-time buyers now.
“Somehow they might be sold this dream and if it’s the difference between getting on the property ladder than paying rent then great – I just want people to be aware of what it might mean for them.”
Becky says the interest rate was extortionate for the value of the property they had bought. Despite the terrace costing just £72,000, an interest rate of eight per cent saw them paying £600 a month for their mortgage.
She said: “It was a significant amount of money per month for the home we had. If we had a deposit, it would have been significantly less.
“But they said we both had good jobs and could afford it, so it was sold to us that way. There was no independent advice. It was just you can afford it and ‘look you have this money to use.'”
Becky also says they were upsold other products at the estate agency and signed up for their mortgage protection and home insurance – where they were made to sign a document stating they would be fined if they moved products within three years. And as the years went on, they realised what a mistake they had made.
Her ex-partner was off work sick for two years after being involved in a serious motorbike accident, which saw Becky hold the fort covering the bills. They eventually re-mortgaged to have some work done on the house but by the time they came to sell it eight years later in 2011, they were left with almost nothing to show for it.
Becky, who is a business improvement consultant with her own business, said: “When we came to sell, we would have been much better off if we had a deal. There wasn’t really anything in it. It covered the solicitor fees and then there was nothing left, we didn’t make a profit.
“I hope this is a positive thing to get people out of the renting trap, but I wouldn’t want anyone to be taking this on and getting themselves in a worse position. Please get really solid, independent advice and really understand what that means for you and your situation because everyone’s financial situation and life is different.
“Also if you are a business owner and struggling to get a mortgage if they want two of three years’ of books, it could be a great thing but definitely compare and contrast against other offers. Don’t be afraid to ask questions – it’s a specialist subject and sometimes we’re made to feel like we should know all about it.”
Rachel Springall, a finance expert at financial information website Moneyfacts, also advised aspiring homeowners to look at the overall costs involved in buying a property. She said: “There are very few 100 per cent LTV mortgages in the market, but even if we were to see more innovative deals surface, affordable housing is very much in short supply, and there need to be significant changes to the market to turn this around.
“There are a few deals that will help first-time buyers get on to the property ladder with family assistance, such as the Barclays’ ‘springboard’ mortgage – however, it’s vital applicants and family members ensure they understand the arrangement before they commit.
“It is imperative borrowers compare the overall true cost of a deal and attempt to save on the upfront cost if they have used up most of their savings on a deposit, legal fees, or moving costs.”
Meanwhile, campaign group Generation Rent argue that only a small percentage of renters will be able to benefit from this type of mortgage and say the wider problem of unaffordable housing needs to be tackled first. Dan Wilson Craw, acting director at Generation Rent said: “To pass the various affordability criteria, borrowers would need to be earning much more than the average household income, and so would be more able to save for a deposit in the first place.
“If this did take off, we would be concerned that without measures to increase the availability of homes, we would have more borrowers competing for the same number of homes, and that would just push up prices.
“Then further down the line the government and lenders would try to come up with another scheme to help first time buyers get a mortgage to pay the inflated prices. Where would it end?
“To properly improve the affordability of housing we need to make more homes available – and that means building more in the places people want to live. More houses mean lower rents, and tenants able to save more in the first place.”
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