With most mortgage providers now looking at whether applicants can afford the repayments on a mortgage rather than using a strict formula to determine the size of a home loan, you may be able to borrow more than you originally thought.

A 100% loan to value mortgage means no deposit is required, making them attractive to first-time buyers or recent divorcees with limited assets. But should you take the risk?

These aren't exactly troubled times for the housing market, there is reason for caution. There have been four interest rate rises since August 2006 and although the Bank of England kept the base rate on hold at 5.5% in June, there is the threat of further hikes to come; some predict a 6% level by the end of the year.

Repayments rising

Rising mortgage interest rates coupled with increasing house prices have resulted in many first-time buyers no longer being able to buy. Halifax research shows the average price of a UK house increased by almost 21% to £197,000 in the two years to June 2007.

The Council of Mortgage Lenders (CML) reports that mortgage interest payments for aspiring home owners are at their least affordable level for 15 years; an average of 18.7% of income is now needed to cover interest payments. Seasoned home movers are also finding it tough, now parting with an average of 16.3% of income to service their mortgage.

The bigger the mortgage, the bigger the monthly cost

Mortgages of four or five times the borrowers income are now required to get a foot on the property ladder, some predict this will rise to 10 times income for the next generation of first time buyers, and there has been a huge growth in the 100% mortgage market.

The popular route to home ownership is the fixed rate mortgage deal, the choice of four in five first time buyers according to the Royal Institute of Chartered Surveyors (RICS). In April, reports the CML, 88% of first timers and 72% of home movers opted for a fixed interest rate over a set period.

Meanwhile, with some 2 million fixes coming to an end over the next 18 months, many borrowers could be faced with a significant increase in their monthly outgoings. A RICS spokesman said that the price of mortgage fixes has risen consistently in 2007 and "is set to rise further as interest rate increases and lingering inflation concerns raise longer-dated borrowing costs."