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Nationwide defends 125% mortgage
Ben Bailey09.07.09
Britain's biggest building society has launched a 125 per cent mortgage.
Nationwide said the “very niche” product was aimed at homeowners in negative equity who were keen to move. Details emerged as the Bank of England left its official interest rate at a record low of 0.5 per cent for the fifth month on the trot.
The building society said existing customers in negative equity would be offered its 95 per cent loan-to-value deals, with rates of 6.73 per cent fixed for three years or 7.48 per cent for five.
The interest rates for the additional borrowing — up to another 30 per cent — rise to 7.23 per cent and 7.98 per cent. It is only open to existing customers.
However, news of the product was overshadowed by latest figures showing lenders are still refusing to increase lending to home buyers.
The number of loans for house purchases rose only marginally to 37,400 between April and May.
Lending is still 28 per cent down on a year ago as measured by number of loans, and down 39 per cent by value, according to the figures from the Council of Mortgage Lenders.
However, the CML said there was growing evidence that the huge tightening of lending terms seen over the winter and spring has stopped getting worse and it predicted that mortgages will soon get slightly easier to come by.
CML economist Paul Samter said: “The Bank of Mum and Dad remains an apparently important source of help for young first-time buyers.
“Some mortgage products specifically reflect this fact, and again we may begin to see more products that echo that phenomenon.”
But Brendan Barber, TUC General Secretary said that access to mortgage funding was only increasing “at a snail's pace”.
Reader views (4)
Nationwide what you are doing does not help the situation. Why are you doing it? YOU ARE A STUPID IDIOT!
You just don't get it!
- Max, London
Darling - First test after saying you will clamp down on irresponsible lending. Given that you are a Labour politician, I bet you fail this test too!
- Dave Davies, Basingstoke, Hants
It's completely responsible. NOT offering such a product would be irresponsible.
What's the alternative? Suppose someone has negative equity because of the fallen market value of their house, but are comfortably making their mortgage repayments. Suppose the company that they are working for is relocating. They couldn't sell because they couldn't pay off the mortgage from the sale proceeds. So they couldn't move. So they'd become unemployed. At best the taxpayer would end up paying their mortgage while they seek another job during a recession. At worst they'd end up unable to pay the mortgage interest, reposessed, homeless, rehoused at taxpayer expense, still unemployed, while the bank that reposessed the house suffers a loss when they sell it.
That would be financial disaster for both parties, when there was no problem in the first place. Instead, just transfer the negative equity and the affordable mortgage interest onto a new property worth no less than the original one, and everyone is better-off: the customer, the bank, and the taxpayer. That's what this mortgage is for.
- Nigel, London
Total irresponsibility, and encouraged by the lax attitude of Brown & Co.
- Phil Jones, London UK
