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Why are there no more 100 percent mortgage lenders?

In case you somehow managed to miss it, the world is having something of a tough time when it comes to finances at the moment. The collapse of the global economy may not have been exclusively caused by it, but it's impossible for anyone to say in all honestly that the huge increase of 100 percent mortgage lenders played no part in the problems.

Up until 2008 there were countless financial institutions across the United Kingdom, Ireland and beyond offering customers mortgages at 100% the value of their homes. This means that those customers didn't need a deposit in order to receive huge sums of money - often for vastly overpriced housing that was never going to maintain its value, never mind increase like some hoped it would.

The problem was that the banks didn't see any of this as a risk, despite the warnings of others. The fact is that house prices had continued rising for years, and showed no sign of stopping so the banks saw these types of mortgages as safe investments, and didn't stop to wonder just what would happen when the house prices started falling.

In the United Kingdom, the government saw in 2008 what was happening and introduced new legislation which they hoped could bring an end to the epidemic of 100 percent mortgages. This led to new capital adequacy rules which stated that lenders must set aside money for each percentage loaned over 75% of the value of the property they were buying. This prevented borrowers from taking out huge loans with absolutely no savings of their own to back them up.

These days, someone seeking a new mortgage will need at least 10% of the value of the home or land they are planning to buy in order to have any chance of being successful in their application, which means that the government scheme can be considered a success, and if you're currently cursing your luck that you missed out on a 100% mortgage, stop and be thankful that you didn't buy three or four years ago, only to be left with a home now valued at a fraction of the price you paid originally, and a huge mortgage you are struggling to repay!

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