There's a saying: "Few rich men own their own property. The property owns them." In Bermuda, it might be more accurate to say "Few rich men own their own property... the bank owns it."

Property prices have risen to such heights that local banks are frequently having to offer 95 percent mortgages to first time buyers to help them purchase a property.

There is such a shortage of property on the Island that, according to realtors, the average cost of a house in Bermuda has risen to nearly $1 million. This means that it is very difficult for a buyer to afford a ten percent down payment customary in other parts of the world.

Local banks have responded by lending a higher percentage of property value and bringing the "deposit" that the buyer has to pay down to a more affordable level.

Today the Bank of Bermuda joined other lenders, including the Bermuda Housing Corporation and the Bank of Butterfield, both of which now offer 95 percent mortgages.

The bank announced that Bermudian first time buyers will be able to borrow up to $750,000 at a competitive interest rate of 8.75 percent. Frederika Forth of the Bank of Bermuda's lending department said "I know it might not be news for Bermuda but it's certainly wonderful news for Bermudians."

Ms Forth said that the interest rate is not fixed - it is based on a base rate (currently 4.5 per cent) plus 4.15 per cent. If the base rate increases, the overall interest rate will go up. However she said it was unlikely that interest rates would suddenly increase "That's never been the case and we don't expect it to happen."

Over at the Bank of Butterfield, first time buyers have been offered 95 per cent mortgage for the last three years.

"It's a major source of business." said Eddie Belfont of Bank of Butterfield's consumer credit department. He said that in order to be eligible, the borrower must demonstrate the ability to be able to make monthly payments comfortably.

"The application must fit an appropriate debt service ratio - it can't be more than 50 percent," he said.

Mr. Belfont added that the 95 percent loans were not available for building a property: "We don't advance the money for construction, but it does include condos."

According to Ms Forth, the Bank of Bermuda's new product goes further than other 95 percent mortgage products. It is available for most kinds of property, condos, houses, even "fixer uppers" so long as they are habitable and insurable.

Other lenders restrict their 95 percent loans to owner-occupied properties, but according to Ms Forth, "our product is very flexible - the property can be owner occupied or non-owner occupied".

Ms Forth said that according to her realtor sources, property prices are unlikely to decrease. "We're in a sellers' market."

Government MP Dale Butler, who has held seminars on the topic of how to buy a home with no money down, praised the Bank of Bermuda's new policy.

He said: "I can only commend the Bank of Bermuda for showing good corporate community spirit. It's fantastic."

Asked if it would make a difference when house prices were so high he said: "It's better than nothing.

"It's probably more generous than anything in the world given the high costs here. They are not responsible for that situation. At least they are trying.

"Eventually I can see 100 percent mortgages. The hardest part people find is the down payment, most people can make the monthly payments."

He said Bermuda's high cost of living was a constant topic during door-step election canvassing.

"Out of 30 people I spoke to last night at least 20 mentioned they can't afford to live here anymore," said Mr. Butler.

But James Gibbons of The Gibbons Company expressed some reservations. He said there was a slight risk that if property prices fall people could end up owing more than their property is worth. Mr Gibbons said that Gibbons Company has not followed the trend of offering high level debt to equity mortgages.

"As a general rule you're more vulnerable if anything goes wrong and that goes for the lender and the borrower," he said.

Although greater competition in the home loan market would generally favour the consumer, Mr Gibbons said that broadening the terms of loans could have implications for the long term stability of a financial institution.