Nationwide to launch 125% deal for borrowers in negative equity

opinions4u

Linky

"Nationwide Building Society has introduced a mortgage allowing borrowers to take loans worth 125% of the value of the home they are buying.

It will only be available to existing customers in negative equity who want to move house. "

This is exactly the sort of idea that lenders should be pursuing to get the housing market moving.

It's not about increasing risk. It's about allowing customers to move existing risk from one property to another. That gives customers an additional choice beyond "save loads", "repay loads" or "stay put and feel trapped".

The pricing seems a little harsh though, in many cases this will more than double existing mortgage rates for some customers.

Jonbvn

The Gruaniad is reporting the same story.
http://www.guardian.co.uk/money/2009/jul/08/125-per-cent-mortgage-nationwide

What stood out for me were the punitive interest rates with this deal:

Someone taking out the three-year fixed-rate, for example, would pay 6.73% up to 95%, and then 7.23% on the remainder of the loan, up to a maximum of 125%.

IMHO, only to be considered if you are desperate!

payless

I doubt many people would meet criteria for the full 125% ( and thats before credit assessment) - unless maybe downsizing

as max 95% LTV of new property ( so would need 5% cash input+ cover moving costs ) + upto 30% based on the neg equity of existing property- so a sideways move would mean someone who took out a 95% mortgage last time , paid nothing off debt then property fell 35%

good that a lender will assist in moving , but its priced high.

maninthestreet

Similar schemes were in place in the mid-90s. I used such a scheme to move house in early 1997, though it allowed for a 100% mortgage on the new property.

TeddyBear_2

Allowing existing customers to borrow 125 per cent? That's certainly a change of tune for Nationwide, which has always prided itself on the same deals for existing and new customers alike! :rolleyes:

Oh dear, I wonder how that will go down for new customers who wish to change their lender? Of course, I am of the view that the Nationwide should be looking after existing customers who have given them several years of loyal custom (in my case, approaching 13 years).

maninthestreet

TeddyBear wrote: »

Allowing existing customers to borrow 125 per cent? That's certainly a change of tune for Nationwide, which has always prided itself on the same deals for existing and new customers alike! :rolleyes:

Oh dear, I wonder how that will go down for new customers who wish to change their lender? Of course, I am of the view that the Nationwide should be looking after existing customers who have given them several years of loyal custom (in my case, approaching 13 years).

No lender is going to take on another lender's borrow in negative equity.

TeddyBear_2

maninthestreet wrote: »

No lender is going to take on another lender's borrow in negative equity.

And understandably so, which is what makes a farce of Nationwide's ridiculous and somewhat short-sighted if not naive claim to offer the same deals to new and existing customers alike. There are some examples where to do so for new customers would not be viable, and this is one of them.

mdhelp

Jonbvn wrote: »

The Gruaniad is reporting the same story.
http://www.guardian.co.uk/money/2009/jul/08/125-per-cent-mortgage-nationwide

What stood out for me were the punitive interest rates with this deal:

Someone taking out the three-year fixed-rate, for example, would pay 6.73% up to 95%, and then 7.23% on the remainder of the loan, up to a maximum of 125%.

IMHO, only to be considered if you are desperate!

I agree and reckon there will be very little take up on this. I did read somewhere this has been available for a few weeks with no response so far.

PBA

Nationwide's policy of same deals for new or existing custs actually ended some time ago. They thought that new customers would go for an uncompetitive deal as long as they could renew at the end. They thought wrong.

TeddyBear_2

PBA wrote: »

Nationwide's policy of same deals for new or existing custs actually ended some time ago.

Nationwide actually appears to be swinging it both ways. In the context of the topic of this thread, the offer of 125 per cent is open only to existing customers (and understandably so, as other lenders would be justifiably loathed to entertain such a proposition) while in my instance, the Nationwide made a proposition less attractive to me (a customer of nearly 13 years) than would be on offer to new customers.

PBA wrote: »

They thought that new customers would go for an uncompetitive deal as long as they could renew at the end. They thought wrong.

Yes, it was a short-sighted and naive business decision. Loyalty obviously counts for nothing these days, the very reason it makes good business sense to seek to retain existing custom rather than create a revolving door of merely getting in new customers and risk losing existing customers elsewhere.