Lloyds Banking Group has launched a mortgage product aimed at the Negative Equity Mortgage borrowers that have a mortgage with no capital in their property and they need to move home. This comes as inflation rockets, growth in the economy falls below zero and Mervyn King the Governor of the bank of England recently informed us that we are all in for a choppy year. So is this move by Lloyds a brave move or a stupid move by the partially state owned bank or are they genuinely identifying niche areas in the mortgage market that need help.
Help Is Available For Negative Equity Mortgage Borrowers
The banks need to help the mortgage market in order to aid recovery in this market. In the last few days we have heard that the numbers of first-time mortgage applications were at their lowest for twenty five year. Estate agents had continued to see less people through their doors this year even after the disastrous weather in December which kept many people at home. None of this is helping a depressed mortgage market.
Lloyds Launches A New Negative Equity Mortgage
Lloyds has launched their Second Stepper product that will allow homeowners with a negative equity mortgage to borrow up to a maximum of 120% LTV (loan to value) to move home. This mortgage will allow borrowers that meet their strict criteria to sell their current home and move to a home of the same value, or to downsize or to buy a bigger home. Customers will be allowed to reduce their borrowing from the sale of their property and in exceptional situations they will be able to increase their existing level of borrowing depending on their income and circumstances.
A negative equity occurs when the value of your home falls below the value of the mortgage that you secured on your property. Most borrowers have no idea that they are in this situation until they come to sell their home. Then they discover that they now owe more money then they originally borrowed from the bank or building society. A negative equity mortgage is never a problem until you come to sell your home to move.
Negative Equity Mortgage Scenario
Most people find themselves stuck in a catch twenty two scenario with a negative equity mortgage where they cannot move until they can raise enough money to cover the shortfall in their mortgage. Then if they do sell up and move they need to find a 15% deposit to secure their next home. This is the same problem that is facing first-time buyers at present. Lloyds Banking Group should be congratulated on a brave move and lets hope that they can lead the way in 95% first-time buyer mortgages and remortgages.
Your thoughts, experiences and comments about negative equity mortgage are welcome below.