Butterfield Bank yesterday launched their own 100 percent mortgage — just eight days after the Bank of Bermuda launched a similar product.

The Butterfield Bank deal will be open to qualifying first-time home buyers, who will be able to borrow up to a maximum of $1 million, without putting down a deposit, on a 30-year term.

The interest rate will be fixed at 6.95 percent for three years.

“Anyone who is contemplating the purchase of a home in Bermuda is acutely aware of how much housing prices have increased over the last couple of years,” said Eddie Belfon, vice president of Consumer Credit at Butterfield Bank.

“We are introducing 100 percent financing at rates that were previously available only to those with a five percent down payment to keep step with the changing realities of the Bermuda marketplace.”

Borrowers who obtain 100 percent financing on a $1-million property would pay $6,619 (including principal payments) each month, based on a 30-year term and an annual interest rate of 6.95 percent.

The Bank said this was $175 lower than interest-only monthly payments of $6,794 available at eight percent in the market.

“With our offer, homeowners begin repaying a portion of the mortgage principal with their first monthly payment,” Mr. Belfon added. “That’s an important distinction. It means that home buyers who borrow from Butterfield Bank will begin building equity faster, and will actually own their home sooner.” The Bank of Bermuda’s “Home Start Mortgage”, launched last week, offers borrowers the option of making interest-only payments for the first three years.

Mr. Belfon said Butterfield Bank was “steering clear of introducing any off-the-shelf” interest-only 100 percent mortgage products.

“We’re interested in helping homeowners actually own their homes, rather than simply pay the Bank for years and have no equity to show for it,” he said.

Mr. Belfon added that the Bank believed a mortgage should be “a customised product, not a standardised one” and each customer’s differing needs would be taken into account.

One hundred percent mortgages have become more popular with lenders around the world, as rising property prices have made it increasingly difficult for first-time buyers to come up with a deposit.

Some lenders in the UK have even introduced mortgages of up to 130 percent, which critics consider risky, as the borrower is immediately thrust into a negative equity situation.