This, rather unsurprisingly, received a huge amount of consumer press, most of which also mentioned Northern Rock’s infamous 125 per cent Together loan. But brokers have welcomed the product.
The premise is simple: Nationwide allows reliable borrowers who are in negative equity to move to a more expensive home and ‘port’ the negative equity with them, as long as they have 5 per cent of the property’s worth.
Because of the increased security in the new property the borrower could move out of negative equity.
Speaking to advisers and lenders alike, this product has been warmly received – Brentchase Financial managing director Mike Fitzgerald told me this is exactly what he has been waiting to see: sensible innovation within the rules.
John Charcol senior technical manager Ray Boulger says he has talked to two more lenders who are considering offering a similar deal.
One major lender told me it would love to offer a similar product but for its risk managers never allowing it to leave the drawing board.
Some advisers will probably looked unfavourably on the uncompetitive rates – for the three-year mortgage the rate is 6.73 per cent on the first 95 per cent of the loan, and 7.23 per cent on the negative equity carried over from the previous property, and for the five-year mortgage the rate is 7.48 per cent on the first 95 per cent, and 7.98 per cent on the negative equity.
So has Nationwide been given a bad rap? It has repeatedly said this deal is only for the chosen few – London & Country mortgage broker David Hollingworth says a borrower will have to be able to walk on water if they are to have any hope of securing this deal. This isn’t a new idea – Halifax was offering similar loans in the 1990s.
Also, it very different to Northern Rock’s loan – admittedly the Nationwide deal splits the loan between 95 per cent and 30 per cent loans like the Together mortgage, but Nationwide’s deal is fully secured, unlike Northern Rock’s.
What do you think – would you advise your clients to go for Nationwide’s 125 per cent mortgage? Are you hoping more lenders offer similar deals? Or is this just another example of reckless lending that will ultimately hurt the borrower?