Leeds acquires a dangerous habit

I know, I\'m on my soapbox again but I can\'t resist it. Leeds has caught the Abbey habit. It is offering a 5 x income mortgage product at 6.25% available to 95% LTV without fees.

Karen Wint, marketing manager at Leeds, explains hopefully that the mortgage “will help more customers who have smaller deposits or equity get the house they’re looking for”.

Yes, that’s also my interpretation of what a 95% LTV mortgage is designed to do.

She goes on to confirm that “first-time buyers will clearly benefit from this fee-free product”.

How wonderful. But their problems will come when they set about furnishing their new pad, paying for utilities, paying the Council Tax and having enough left over to eat. Well, who cares? The mortgage got them in there, so job done.

Anyway, Leeds tells us that this is mainly going to “appeal to young professionals who expect their salaries to increase significantly after qualification in their chosen field”. Presumably they can live in said field if their prospects don’t materialise. Get a tent – another result.

And let’s not even consider what will happen if the bank rate increases. Well, alright – it’s going to cost more. And yes I agree, using multiples of income as an evaluation tool for determining borrowing potential is outmoded and makes no sense. Replacing income multiples with affordability assessments is a no-brainer.

But salary multiples provided a degree of sensible restraint, preventing borrowers becoming financially overstretched. No, it didn’t stop them running up hire purchase and credit card balances the day after they’d completed but at least their mortgage liability was manageable.

I’m sorry to say it but the reality is that few people can keep all their financial plates spinning when the mortgage platter is revolving to the tune of 5 x income. And it’s not Leeds that will have to pick up the pieces.

It may well be congratulating itself on joining the ranks of lenders that feel they are making dreams come true. But dressing up a dangerous product with a few freebies doesn’t make a sow’s ear into a silk purse.

This is a mortgage to be avoided by the majority and entered into with extreme caution by the few for whom it might be appropriate. But as ever, too many will slip through the qualification net only to meet with disaster. Oh dear, Leeds – this is not your finest hour.