125% Mortgages are Back
Nationwide has hit the headlines with news that it can offer homebuyers a mortgage of as high as 125% of the property value.
This initially sounds like a return to the lending practices of the “pre-crunch years” and the now infamous Northern Rock Together mortgage. Whilst the Together 125% deal actually served some borrowers pretty well it has become synonymous with the carefree credit conditions of 2007.
However when you look closely at the Nationwide proposition it is a world away from replicating the Northern Rock product. It is designed to help existing borrowers that need to move home but now find themselves in negative equity, as their property value has fallen to the extent that it is less than the outstanding mortgage.
Nationwide allows all existing customers moving home to borrow as much as 95% of the property value albeit at higher interest rates. In this scenario the borrower still needs to put in at least a 5% deposit but they can also borrow an amount to cover the negative equity, although this is charged at an even higher rate.
The reality is that this initiative will only have any relevance to a small niche of borrowers that really need to move, perhaps to relocate for a new job or to accommodate an expanding family. However it will at least provide an option to those that have a genuine need to move.
Borrowers looking to find out how much their current property is worth can use a http://www.lcplc.co.uk/calculators - London & Country Mortgages house price calculator. They can then calculate their loan to value ratio (LTV) by dividing the current balance of their mortgage by the current value of their home. If this is over 100% they will have negative equity.
Notes to editors:
London and Country Mortgages Ltd is the country’s leading whole of market no-fee mortgage broker and submitted over £4bn of mortgages to over 70 lenders in 2008.
For more information visit our website http://www.lcplc.co.uk
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Best Mortgage IFA/Adviser of the Year – Money Marketing, 2004, 2005, 2006 and 2008
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Best Mortgage Broker outside London – Mortgage Strategy, 2004 and 2005
Best National Broker – Mortgage Introducer 2005, 2006 and 2007
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Overall broker of the year – Pink Home Loans, 2006 and 2007
Top 100 company in the Sunday Times Fast Track 100 for 2004 and 2005
Business of the Year – The Bath Business Awards 2005
Growth Strategy of the Year – National Business Awards (Wales and West) 2008
Business Leader (Broker) – British Mortgage Awards - 2008
Online Mortgage IFA of the Year – Financial Adviser - 2008
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