Stuck in negative equity? BBC Online has investigated a new mortgage proposed by the building society Nationwide which will give borrowers the chance to get money up to the value of 125% of the property they intend to buy with it. The mortgage would be only available to those existing customers in negative equity, where the value of the house a person owns is less than the amount they owe on their mortgage.
The Financial Services Authority has made suggestions at limiting borrowing to only 100% of the home. As it stands any new borrower would only be able to take out 85% of the value of the home, and existing customers would be able to take out 95% at various rates of interest.
However, despite the financial product first being offered in June it has not been actively marketed and none of Nationwide’s customers have taken it.
Loans above 100% have received a lot of criticism at the height of the housing boom, which effectively placed borrowers in imminent negative equity, in particular the notable culprits was the now nationalised Northern Rock. On one side Ray Boulger of John Charcol Mortgage Broking said the deal to be a ‘consumer friendly move’. However, Critics like Jonathan Davis argue that it is exposing itself to potential further losses.
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