You definitely can do that. Lots of people take out both mortgages and personal loans when they are moving. Some use the personal loans for furniture or repairs etc. Once you have a personal loan you can do what you want with the cash.
The only question is if the personal loan provider thinks she can afford the repayments. If the size of her mortgage is being constrained by the max LTV the lender provides rather than her ability to pay, she'll qualify for both the mortgage and the personal loan individually.
I expect she will try not to let the lenders know what she is doing, as she will be overextended and unable to service her debt when interest rates go up. She will not be able to get a secured loan. The payments on a £70k personal loan will be rather high.
The lenders will not like it because when she gets into arrears and they repossess the house there might not be enough value to pay off the loans and their enormous charges.
If she has enough income to make the repayments (e.g. she has undeclared income as a burglar or drug dealer) she should be saving up to increase her deposit.
I didn't even think about interests rates going up... I was more worried about her DPnot getting work for a short while (self-employed) or her being made redundant (unstable industry, been made redundant before).
She has a very healthy deposit - but basically wants to borrow x5 their joint income.
5x sounds like she is definitely over-extending herself. The personal loan doesn't impact the banks debt at all as they will have a first mortgage. The bank will only care insomuch as there is a greater risk of default on the income side. Even so, if she does run into money trouble, she�ll probably default on the unsecured personal loan rather than her mortgage. Still its very risky borrowing that much money�you should try to talk some sense into her if she�s willing to listen as financial security is worth more than a bigger house.
I just realised stamp duty alone would be over 21k, presumably she'd be looking to borrow that as well. I've tried talking some sense into her, now trying to detach - although neither option seems to be working!