The measure has been put into place by the Nationwide and the Coventry Building Society, with the aim of the measure being to help those that are trapped in negative equity and therefore cannot move home.

With property prices having plunged since their peak back in 2007 many homeowners have seen their equity levels plummet, with some finding that their properties are now worth less than the amount that they have outstanding on them by way of a mortgage.

This is known as negative equity, and homeowners that find themselves in the situation are often trapped and cannot move because of the level of debt that they have on the property.

The move by the two building societies has been welcomed by mortgage brokers, and could help many people that would otherwise be unable to move to do so. The Council of Mortgage Lenders estimates that there are around nine hundred thousand people that are trapped in negative equity.

A broker from Trinity Financial Group, Aaron Strutt, said that the move would enable many people to get out of the trappings of negative equity.

He said: “Having more flexible criteria for existing customers in negative equity will make them feel less trapped. If both parties will be in better financial positions through porting the existing deal to another property, it is a no brainer. We should see more lenders helping their customers in this way.”

The Conventry Building Society said: “As a mutual this is what our members expect of us. We are offering a sensible level of support to people we have a relationship with who are facing real difficulty in moving home.”

Lenders offer 125 percent mortgages to existing customers is a post from: Glitec Loans

It will come as a shock to most at first sight- we’ve been trained over the last year to believe that 100% mortgage equals bad, irresponsible lending and one of many reasons we’re in the property pickle we’re in today.

People were allowed, encouraged and even, when property values began to spiral out of control, felt forced to take out mortgages that they clearly couldn’t afford. The best deals lately have been restricted to those with a 40% deposit.

When someone was lent more money than their home worth, they were essentially taking a gamble (as was the lender) that the property prices were simply going to keep rising until their loan to value dropped below 100% and they could get on a better deal.

When property prices suddenly dropped, many were left with more negative equity than they even started with and others with a small deposit were plunged into negative equity and essentially trapped in their property (and with high LTV mortgages dwindling, trapped with their mortgage provider unless they could come up with an additional deposit).

So is this just an example of recovering mortgage lenders getting greedy once again and lending recklessly?

Not really, and here’s why:

This mortgage is only going to be available to current Nationwide customers, not new borrowers and NOT first time buyers.

Effectively, people who already are saddled with a 125% mortgage due to negative equity. These people have already been lent the money, so not to lend to them now would be a little like closing the door after the horse had bolted. This is a way for Nationwide customers to be able to move house even while in negative equity.

The deal does come at a price though – customers can still only borrow up to 95% of the value of the new property.

Here are the rates: On the three year deal, 6.73% interest is payable on the first 95% of the loan, and 7.23% on the negative equity carried over from the previous property.

On the five year deal, it is a hefty 7.48% on the first 95% and 7.98% on the negative equity.

So, not cheap by any means. When taken into account that the rates from which lenders make up their fixed rate deals are around the 3% mark and the fact that Nationwide’s standard variable rate is just 2.5%, it’s very clear that staying put and overpaying where possible in order to take advantage of the low interest rate is still the best bet.

However for some people who have to move due to work or with a growing family etc., this deal will come as a lifeline. Maybe now other lenders will follow suit to help out their customers who now, thanks to their low deposits being accepted back during the housing boom, find themselves stuck in an unsuitable property.

125% Mortgage – Nationwide’s Boost To Those In Negative Equity is a post from: Glitec Loans

These huge mortgages have now been scrapped by some of the biggest lenders in the mortgage sector, including Abbey and the Alliance and Leicester. Northern Rock held fire for a few days, but has now joined the string of lenders that will no longer offer these huge mortgages, with one Rock official stating: “Our present lending appetite has changed. And demand for this product has now fallen to negligible levels, so we are withdrawing it.”

In the past 125% mortgages have proven popular amongst first time buyers and other financially strapped homebuyers that need to raise extra cash for additional costs such as improving the property, furnishing, etc. However, with these mortgages now being scrapped by major lenders both existing and new homeowners could face problems. For those on existing 125% mortgages things could prove financially difficult when it special offer comes to an end and they need to remortgages. As well as facing high rates they will also be classed as being left with a large unsecured loan, which will impact upon their ability to borrow.

A broker from John Charcol stated: ‘If a borrower gets into difficult with little or no equity in their home, they’ve got nowhere to go.’

Over recent years, and particularly in the current financial climate 125% mortgage have come under fire because the borrower is instantly saddled with a huge amount of debt and is also instantly placed into negative equity because they have borrowed more than the value of their property.

Even the availability of 100% mortgages has tumbled over recent months, with only one in ten mortgage lenders now offering 100% mortgages now compared to around a third of mortgage lenders offering them towards the end of last year. In fact, many lenders have not only cut the mortgage that offer the full value or over the value of the property, but some are asking for an even higher deposit that then traditional 5% – further evident of the tightening lending conditions that have resulted from the global credit crunch.

According to experts the main reasons why so many lenders have decided to withdraw from offering mortgages of 100% and more are fears over lending to higher risk customers and also difficulties in getting finance due to the high cost of inter-bank lending and difficulties obtaining finance for loans themselves.

One analyst said that existing homeowners with these huge mortgages could really struggle when their deal comes to an end, stating: ‘If these deals do not return, borrowers are going to have to work a lot harder to reduce their debt.’

Related news and articles:

• The Benefits of a UK Mortgage Broker
• Fixed Rate or Variable Rate Mortgage
• Home sellers struggling to sell their properties
• Mortgages – some frequently asked questions
• Mortgage brokers banned due to false applications

End Of The Road For 125% Mortgages is a post from: Glitec Loans

This week along a number of lenders have announced that they are taking 125% mortgages off the market, including the Abbey and the Alliance and Leicester. With so many major lenders now refusing to offer this type of mortgage a number of consumers could run into difficulties. In the past 125% mortgages have proven popular amongst first time buyers, who have used the additional cash for things such as carrying out home improvements, furnishing the property, and decorating their new home.

With a 125% mortgage there is a secured mortgage element that makes up 95% of the loan, and the remaining 30% comes in the form of an unsecured loan for up to £25,000 – £30,000. Those with 135% mortgages who are looking to remortgage in the future could face severe difficulties as a result of the reduced number of mortgages of this nature that are available. Most will only be able to remortgage the 95% mortgage element of the loan, leaving them lumbered with a large unsecured loan that will go against them when looking for a competitive deal on a remortgage.

One industry professional said: “With so many prominent lenders exiting the 100%-plus mortgage market this week, consumer confidence is going to be knocked again. First-time buyers will be hit hardest, with repayments likely to shoot up when they come to remortgage. At a time when consumer confidence is so low, it is disappointing that lenders are adding to the panic.”

Recent mortgage news

• Mortgage brokers banned due to false applications
• Home sellers struggling to sell their properties

Lenders announce withdrawal of 125% mortgages is a post from: Glitec Loans