Wednesday 14th May 2008
Future Alliance & Leicester customers are to find their mortgage rates based on the amount they have available to put down as a deposit, the financial services provider has announced.
Two new mortgages were unveiled by the lender on Friday which put in place a tiered system which charges more for those looking to obtain a greater loan-to-value (LTV) ratio.
Such a ratio represents the proportion of the propertys value which is taken in the form of the mortgage - and has come under scrutiny in light of the tightened lending conditions in the market over recent weeks.
In October, chancellor Alistair Darling suggested that high LTV mortgages and income multiples were causing house prices to reach unsustainable levels.
Now, following the credit crunch, economists claim that the days of 100 and 125 per cent loans could be gone for good.
Alliance & Leicester has now capped its residential mortgages at a maximum of 90 per cent LTV, but introduced a second tier for those who can place a 25 per cent deposit down.
The 75 per cent LTV products include a two-year deal fixed at 5.99 per cent interest, after which it reverts to the lenders standard variable rate.
Alternatively, a two-year base rate tracker remains at 0.89 percentage points above the rate set by the Bank of England, reverting to 1.49 per cent above the basis level after 24 months.
Each comes with a two per cent arrangement fee, the option to overpay on monthly charges and a maximum loan value of £1 million.
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