Credit crunch lending is over!
Posted by admin on 12 July, 2009 under Business news, Credit crunch | 
7 Comments to Read
This week we saw the Nationwide bank launch a 125% mortgage which will hopefully be the beginning of the end of a time of limited borrowing during times of credit crunch lending!
The Nationwide’s new loan facility is to help existing customers who want to move, but can’t because they are in negative equity. The way this new lending works is that the customer will be able to borrow up to 95% of the value of their new home, so they will need to have a 5% deposit.
Subject to fulfilling certain conditions, customers will then be able to add the negative equity from the house they are selling to the new mortgage, so long as this amount of extra lending does not exceed 25% of the new homes value.
For example:
A customer has an existing house worth £175,000 with a mortgage of £250,000, which means they are in negative equity by £75,000.
They want to buy a new house that is worth £275,000, on which the Nationwide would potentially lend £261,250 (which represents 95% of the value) – they will need a deposit of £13,750. This extra lending is subject to a few conditions and their new “stress test”. This new stress test will ensure that customers are still able to afford the mortgage repayments if interest rates have risen to 9% or 10% once the fixed-rate element of the loan has expired.
The maximum extra they could borrow in this case would be 25 per cent of £275,000, which is £68,750. So in this example they would not be able to borrow the whole of the equity short-fall of £75,000 and would therefore need to put a further £6,250 into the deal.
Nationwide customers will be offered a three-year fixed rate mortgage at 6.73 per cent or a five-year one at 7.48 per cent on the 95 per cent portion of the mortgage. Interest charged on the negative equity element of the borrowing rises to 7.23 per cent for three-year fixed and 7.98 per cent for five-year fixed.
These rates are quite high in the present market so customers will obviously be quite desperate to move up if they are willing to pay these high fixed rate mortgages!
almir said,
Do we never learn? What caused the global financial crisis? Ridiculous lending – the Nationwide are going to lend to customers who are already in negative equity. Crazy
.-= almir´s last blog ..Used Car Buying =-.
Business Web Templates said,
Yes, based on the numerouse news report on the economy so far, it seems like the credit crunch is easing. Seems to be bottoming out, but the recovery will be slow and gradual, and will take a few years for things to be back to where it was before the global economic recession.
Michael said,
Those interest rates are ridiculous. All this gimmick will do is get people who cannot afford it into more debt.
I can understand that Nationwide is trying to kick start the housing market, but this kind of lending is not helping!
100-mortgage said,
Lets hope they’ve learnt their lesson and lend to the correct people, rather than just quantity as we have seen where that puts us all. There are still deserving businesses out there who are being ignored, crazy!
Online Paid Survey Job said,
This is daylight robbery isn’t it? The rates are high. But then, the credit lending is indeed easing up. Hope this trend continue. There are 2 school of thoughts now. One is that the economy is getting better, the other is that the economy is not yet out of the woods. I belong to the second one…
.-= Online Paid Survey Job´s last blog ..Free Work at Home Opportunities That You Can Consider =-.
Michael said,
Agree, it seems that we don’t learn from our mistakes, however if we see the positive side of it, it looks like we can see a small sun ray through the massive clouds of economic turmoil. Let’s hope for the best, perhaps we can learn from our mistakes…
.-= Michael ´s last blog ..A great music experience =-.
Neil | Life Quote said,
The economy is nowhere near out of the woods! ANy rebound is not a recovery, it’s just a temporary delay in the real apocolyptic scale economic meltdown. It is a house built of cards….credit cards.
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