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Lloyds launches scheme for borrowers in negative equity

Lloyds Banking Group has launched a new scheme to help borrowers suffering from negative equity to move home.

It allows borrowers who are in negative equity to borrow up to 120 per cent loan-to-value to move to a property of the same value, buy a bigger home or downsize.

Borrowers have to raise an additional deposit to move home, if the value of the new property excedes the current property’s value, but do not have to increase the size of their mortgage.

For example, a borrower who has a mortgage of £130,000 but has seen their property value fall to £110,000 – making the LTV 118 per cent – would be able to move to a new property worth £120,000 with an additional £10,000 deposit, lowering the LTV to 108 per cent.

If the value of the existing property is the same as the new property, borrowers can port their existing mortgage rate as the LTV would be the same.

The scheme is available to existing mortgage customers of the bank but it says it will consider allowing brokers access to the scheme if it proves successful.

Managing director for mortgages Colin Walsh says: “It is right that we can continue to help people buy their first home, but we should not underestimate the role second steppers have in making that happen. They are the link between first-time buyers and the rest of the market – and at the moment, many are finding it just as tough to make the next move as it was to make their first.”

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