Call to bring back 100% mortgages for first-time buyers to help them get onto the property ladder

First-time buyers should be allowed to take out controversial 100 per cent mortgages where no deposit is required, says a major industry body.

The home loans were blamed for fuelling the 2008 financial crisis, but the Building Societies Association (BSA) says lenders should ‘revisit’ them to help young people get on to the property ladder.

Seven building societies and two banks, Barclays and Aldermore, already offer 100 per cent mortgages.

However, these lenders either insist on having a parent act as a guarantor or demand a relative put some of their own money into a ring-fenced account in case the borrower cannot meet the repayments.

The BSA is suggesting lenders go a step further and consider offering regular 100 per cent mortgages ‘in selective circumstances’. 

It says that ‘there are circumstances in which the risk can be mitigated — borrowers in certain professions [or] those with high probabilities of substantial inheritance’.

But critics warn borrowers could face negative equity, where they are left with debts higher than the value of their home, if house prices fall. 

Dominik Lipnicki, of the broker Your Mortgage Decisions, says: ‘It’s too risky — we’ve been down that road before. These mortgages were scrapped for a reason.’

And Conservative MP Sir Peter Bottomley adds: ‘Anyone who borrows 100 per cent thinking that interest rates will not go up or that the property’s price will rise is potentially making a life-changing mistake.’

l.eccles@dailymail.co.uk