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The Return of the 125% Mortgage
Last week, the Nationwide Building Society took the seemingly unusual step of launching a 125% mortgage - the very thing that many people would say was the sort of cavalier approach to lending that contributed to the credit crunch in the first place.
However, the new 125% mortgages from Nationwide are not targeted at new customers such as first time buyers desperate to get on the property ladder or those looking to trade up their existing propery. Rather it is only for existing customers who are in negative equity due to the fall in house prices and who still want to move house.
Tony Rice, of Bedfordshire-based specialist mortgage broker TMP Mortgage Zone, said: "What Nationwide is doing is in many ways merely formalising a situation for its customers that already exists - negative equity - and may continue for a little while yet. If house prices are going to remain low, then we actually need more mortgage deals like that provided by the Nationwide to its existing customers to help get the housing market - and more importantly people - moving again. A 125% mortgage should always only be approved based on a stringent set of criteria that includes affordability over the lifetime of the loan."
Home owners finding themselves in negative equity should always consult a whole of market broker or their financial adviser to ensure that they can find a mortgage that is both affordable and suitable to their particular circumstances.
[ 16-07-2009 ]
