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Nationwide Responds to Criticism of 125% LTV Mortgage Lending

Housing-Market / Mortgages Jul 09, 2009 - 04:44 PM GMT

By: Nationwide


As a responsible lender which aims to support its borrowers Nationwide has responded to market conditions and made an option available which enables some existing customers in negative equity to move home. This is not available to new customers. The maximum LTV for existing customers taking a new deal at Nationwide remains at 95%.

Nationwide remains a very prudent and cautious lender with a track record of low arrears, low possessions and has a low LTV (loan-to-value) mortgage book. As the borrower is required to put down a deposit of at least 5%, under this scheme, the LTV and the risk to Nationwide will reduce as a result of the transaction.

Nationwide introduced this option on 10 June 2009 for existing customers only in the following particular circumstances:

  • they are in negative equity
  • they need to move home
  • they meet our strict lending criteria and
  • they have a good credit record.

The Society does not anticipate, and has not seen, a great demand for this service.

Borrowers in these unique circumstances are simply able to transfer part of their existing negative equity with them when they need to move home – as illustrated below the actual value of the negative equity and the LTV will reduce in all circumstances.

The maximum LTV available is 95% on the new property plus the remaining negative equity amount carried forward from the current property. The customer will need to pay a 5% deposit on the new property from their own funds, for example:

Current property value £200,000 New property value £250,000
Current mortgage -£220,000 5% deposit required -£12,500
Negative equity amount =£20,000 Negative equity carried forward +£20,000
Current LTV 110% New mortgage =£257,500
New LTV 103%
New negative equity amount £7,500


Both the main loan and the associated negative equity top-up are restricted to three and five year fixed rate products to protect the customer from potential payment shock over the short term and are only available on a repayment basis.

Rates available on the main loan match those available to existing customers not in a negative equity situation who are moving home with a 95% LTV and are currently:

  • main loan up to 95% LTV: 6.73% (3 year fixed) and 7.48% (5 year fixed)
  • top-up loan covering 100-125% LTV: 7.23% (3 year fixed) and 7.98% (5 year fixed).

Andy McQueen, director of mortgages at Nationwide said: “Nationwide is a responsible lender and our negative equity policy is an appropriate and prudent response to market conditions and demonstrates our continued commitment to supporting our customers.”

Nationwide Archive

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10 Jul 09, 05:35
risky lending

Risking savers' money again by imprudent lending. This is why I won't put any of my savings in banks at the moment and I used to work for banks! When I had negative equity as a youngster years ago in the last crash I had to stay put and pay it back. There is no justification in this type of loan. If you have to move for work rent out the property with a loss on it and pay it back and go and rent something else. It's just the same old subprime lending that got us into this mess in the first place.

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