Debate House Prices


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Nationwide to Offer 125% Mortgages

http://www.ft.com/cms/s/0/64f4b7cc-6bf4-11de-9320-00144feabdc0.html
Negative equity mortgages are being offered to customers of Nationwide that will allow homeowners once again to borrow more than the value of their intended house purchase.



Customers of Nationwide who find themselves trapped in negative equity are able to obtain a new loan of up to 95 per cent of a property, but will also be able to carry over up to 25 per cent of the loss being incurred on their existing property because of the drop in its value. Borrowers will still need to provide 5 per cent in a deposit, however.........


Nationwide is not actively promoting the offer, and does not expect a huge take-up.



The mortgages are being offered on a fixed-rate basis, and borrowers will pay a higher interest rate on the negative equity carried over.

As borrowers will have to stump up an extra 5% of the value of the property, this deal will actually reduce the risk for Nationwide. Clever move IMO.
«13456

Comments

  • Gorgeous_George
    Gorgeous_George Posts: 7,964 Forumite
    Part of the Furniture Combo Breaker
    As much as we deride the 125% mortgages that helped to bring down Northern Rock, Nationwide's move will help people move on in their lives.

    Others will follow Nationwide's lead.

    GG
    There are 10 types of people in this world. Those who understand binary and those that don't.
  • ad9898_3
    ad9898_3 Posts: 3,858 Forumite
    This should be quite good news for falling prices, as it allows Nationwide customers to sell for less than they paid and owe on their mortgages.
  • IveSeenTheLight
    IveSeenTheLight Posts: 13,322 Forumite
    ad9898 wrote: »
    This should be quite good news for falling prices, as it allows Nationwide customers to sell for less than they paid and owe on their mortgages.


    People will be reluctant to sell for lower prices, when every pound they sell for lower, they have to pay a higher interest.

    Quite possible this would help to maintain prices with only those that reluctantly have to sell doing so at a reduced price
    :wall:
    What we've got here is....... failure to communicate.
    Some men you just can't reach.
    :wall:
  • Graham_Devon
    Graham_Devon Posts: 58,560 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    I don't think theres a problem with this either way really. People need to move, and this is giving them the means to do that.

    They just take their debt with them.

    Don't think it will maintain, cause an increase or decrease in prices to be honest.

    Only time that would happen is if a glut of properties hit the market as suddenly because of this product people could move, and that aint gonna happen. but if it did, prices would drop.
  • amcluesent
    amcluesent Posts: 9,425 Forumite
    edited 9 July 2009 at 8:52AM
    >They just take their debt with them.<

    Peeps will soon be leaving debts to their estate to pay off, as they do in Japan.

    With the collapse in public provision and means-testing of benefits, it will be quite smart to retire with net debt position.
  • ad9898_3
    ad9898_3 Posts: 3,858 Forumite
    People will be reluctant to sell for lower prices

    Indeed, however, as with everything in life 'needs' sometimes outweigh 'reluctance'.
  • Heyman_2
    Heyman_2 Posts: 1,819 Forumite
    Interesting to see all the advocates for this on this thread, who are the same people who are usually screaming about the foolhardiness of the population taking on yet more debt.

    Surely this scheme just encourages that? :confused:
  • purch
    purch Posts: 9,865 Forumite
    Indeed, however, as with everything in life 'needs' sometimes outweigh 'reluctance'.

    Yep, this is a 'Break Glass in Case of Emergency' type of Mortgage.
    'In nature, there are neither rewards nor punishments - there are Consequences.'
  • IveSeenTheLight
    IveSeenTheLight Posts: 13,322 Forumite
    ad9898 wrote: »
    Indeed, however, as with everything in life 'needs' sometimes outweigh 'reluctance'.

    True, hence why i said "with only those that reluctantly have to sell doing so at a reduced price "
    :wall:
    What we've got here is....... failure to communicate.
    Some men you just can't reach.
    :wall:
  • Graham_Devon
    Graham_Devon Posts: 58,560 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    Heyman wrote: »
    Interesting to see all the advocates for this on this thread, who are the same people who are usually screaming about the foolhardiness of the population taking on yet more debt.

    Surely this scheme just encourages that? :confused:

    They are not neccesarily taking on more debt. They will be taking their debt with them.

    Just because you move house, it doesnt mean the next one has to be more expensive. You could want to move for job prospects, the be close to loved ones etc.

    You can sell your house for 160k, with a 180k mortgage on it, and buy another house for £160k.

    You still have 20k debt in either house. You have just moved to be able to get on with your life instead of being held prisoner in the house elsewhere.
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