Nationwide to Offer 125% Mortgages

kennyboy66_2

Harry_Powell wrote: »

If you moved house from a £180k house to a £160k house, you'd incur the following expenses:

HIPS Pack: £300 (selling)
Stamp Duty: £1600 (buying)
Solicitors costs: £700 (Selling & Buying)
Estate Agent Cost: £1800 (Selling)
Surveyor Cost: £300 (Buying)
Removal Costs: £900 (Dependant on amount of furniture)
Mortgage Redemption Fees: £1500 (may not affect everyone)
Mortgage Arragement Fees: £500 (I couldn't find info on Nationwide)
Valuation Fee: £335 (buying)

So it would cost about £7935 just to move house, and I have only included costs that I could think of from the top of my head over a 2 min period. I checked out a couple of website (channel 4) to get the amounts and used very conservative figures. I could easily see it costing upto £10k to sell a £180k house and buy a £160k house. Allowing the person to pay off just £10k of debt.

I'd also say it was highly unlikely that people would downsize for such a small "gain". I'd imagine most people using this mortgage will be buying larger properties due to marriage and/or birth of children.

Sorry, I'm, with Heyman. This is another scheme to encourage the foolhardy into more debt.

p.s. as Heyman has also said - the mortgage rate is hardly generous, so the £10k that your test case saved by downsizing may soon be eaten up by mortgage payments.

No one even mentioned downsizing, the example was moving from one £160k house to another £160k house.

They don't expect a huge take up, but people do this type of move if they are moving jobs from one area to another.

Moving is expensive, but in the example given you would not pay stamp duty and probably not pay a redemption penalty if you stay with the Nationwide. That knocks £3k off your calculations.

It also allows people to move to a slightly bigger house (say an extra £40k cost in my area).

Its a fairly good idea, reduces the risk for the bank, forces people to stump up a bit more saving for the deposit, but in return allows them to get on with their lives.

System

adrian_bond wrote: »

hi everyone,

Forgive me if this is wrong, as I was just turning about 9 when the last crash / recession hit...but didn’t mortgage lenders do this last time around the end of the recession so that people could move etc and the market to stabilize?

I may be totally wrong on this, but even tho it will mean massively more debt for some, it would allow homes to change hands once more, and stimulation of a failing system could only be a good thing? could this move signal the smallest glimpse of a green root, instead of shoots?

Please correct im if im wrong. Cheers.

One of the sensible posters here said that once lenders are sure the bottom has been reached then they'll start letting people remortgage from negative equity, which is what happened last time apparently (I don't remember either).

Harry_Powell

kennyboy66 wrote: »

No one even mentioned downsizing, the example was moving from one £160k house to another £160k house.

They don't expect a huge take up, but people do this type of move if they are moving jobs from one area to another.

Moving is expensive, but in the example given you would not pay stamp duty and probably not pay a redemption penalty if you stay with the Nationwide. That knocks £3k off your calculations.

It also allows people to move to a slightly bigger house (say an extra £40k cost in my area).

Its a fairly good idea, reduces the risk for the bank, forces people to stump up a bit more saving for the deposit, but in return allows them to get on with their lives.

Yes, I noticed my error and mentioned it in my previous post. TBH, a sideway's move from a £160k house to another £160k house makes the example more ridiculous not less. Unless you were moving to a rougher area and so could get a larger house, it simply would not make any sense to incur all the removal expenses (even removing the Stamp Duty) except for job relocation. I'm not against the product, I'm against the view that it won't incur more debt to move house.

If they add a further £40k (in your example), then they're definitely just getting into more debt.

System

What if the house is like, 100 miles away?

Gorgeous_George

Here's an example:

Young couple in 2 bed terraced house would like to move to three bed semi.

House value (sale): £150K
Mortgage (old): £190K
£40K Negative Equity

House value (buy) £200K
Mortgage (new): £240K i.e., 120%
Negative Equity £40K

So, you owe £50K more but 'own' a house worth £50K more (and meets your needs) i.e., no net change. Movings costs can be ignored because these have always needed paying - even without negative equity.

GG

Graham_Devon

Harry_Powell wrote: »

Yes, I noticed my error and mentioned it in my previous post. TBH, a sideway's move from a £160k house to another £160k house makes the example more ridiculous not less. Unless you were moving to a rougher area and so could get a larger house, it simply would not make any sense to incur all the removal expenses (even removing the Stamp Duty) except for job relocation. I'm not against the product, I'm against the view that it won't incur more debt to move house.

If they add a further £40k (in your example), then they're definitely just getting into more debt.

Don't know why it's ridiculous. There are plenty of situatuations where you might find yourself wanting for personal reasons that are important to you, or for job reasons to move 50 miles away or 400 miles away.

You don't have to upgrade or downgrade to move house.

Whether they got an upgrade or downgrade would depend on property prices in the area they are going to vs where they have come from.

But in terms of finances, you can sell one place for 160k, and buy another place for 160k.

The moving costs are nothing to do with this product.

System

Gorgeous_George wrote: »

Here's an example:

Young couple in 2 bed terraced house would like to move to three bed semi.

House value (sale): £150K
Mortgage (old): £190K
£40K Negative Equity

House value (buy) £200K
Mortgage (new): £240K i.e., 120%
Negative Equity £40K

So, you owe £50K more but 'own' a house worth £50K more (and meets your needs) i.e., no net change. Movings costs can be ignored because these have always needed paying - even without negative equity.

GG

It says they'll need 5% of the extra bit, do it again

Graham_Devon

Joeskeppi wrote: »

It says they'll need 5% of the extra bit, do it again

Do what again?

Not sure if you are picking up my back of a fag packet type examples and seriously want me to sit here working out interest, 5% deposit, moving fee's etc, JUST to make an example?

If that's what your trying to tell me I should do if I want to back up the sound reasoning for a product, forget it!

What on EARTH is wrong with you bulls lately? Back up a product that you are also saying is good and you STILL need to find something to thank each other about.

Generali

adrian_bond wrote: »

hi everyone,

Forgive me if this is wrong, as I was just turning about 9 when the last crash / recession hit...but didn’t mortgage lenders do this last time around the end of the recession so that people could move etc and the market to stabilize?

I may be totally wrong on this, but even tho it will mean massively more debt for some, it would allow homes to change hands once more, and stimulation of a failing system could only be a good thing? could this move signal the smallest glimpse of a green root, instead of shoots?

Please correct im if im wrong. Cheers.

TBH I don't see it having any net effect on the housing market - people will just swap one property in which they hae negative equity for another. The only real gainer is Nationwide as they require their customer to put extra money into the deal on top of moving expenses and get to charge a higher rate of interest too.

My opinion remains that the only way that the housing market can stabilise or even rise in price in the medium term is for the mortgage market to sort itself out.

PS Mortgages can't be passed on to the next generation - by definition they end at death (mortgage means death pledge - the loan dies with you).

Graham_Devon

Lets not forget. It makes no difference to Nationwide whether their customer has 20k debt via negative equity on House A or 20k extra owed to them on House B.

All they are doing, is making more money from the negative equity, by turning it into a debt, and then charging a higher rate for the privilege, but also, getting them to borrow 160k again (for example).

Currently, Nationwide cannot make money on that 20k negative equity. If they swallow it on behalf of their existing customer, it turns a non income generating 20k negative equity hole into a debt which they can charge on.

If they default, it makes no difference to nationwide which way they default, as nationwide would still be 20k down either way. So nice little money earner for Nationwide.