Lloyds launches deal for borrowers in negative equity
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Lloyds Banking Group has launched a new deal for existing borrowers in negative equity that is available direct only.
The Second Steppers scheme will allow borrowers who are in negative equity of up to 120% LTV to move to a property of the same value, buy a bigger home or downsize.
Customers can move without increasing their existing levels of borrowing and channel any additional funds into their new home.
For example if the current property is valued at £110,000 and the borrower has a mortgage of £130,000, which is 118% LTV, they could move to a new property worth £120,000 and pay a £10,000 additional deposit, reducing their LTV to 108%.
The scheme is launching on February 2 and will be available to first-time buyers of Lloyds and all existing Lloyds borrowers and borrowers will be able to port their existing mortgage rate.
Lloyds says a typical second stepper is somebody who bought their first home at the beginning of 2008 and now finds they are unable to move home because of negative equity, but might want to move up the housing ladder or move to a similar property in a different location.
Sue Anderson, head of member and external relations at the Council of Mortgage Lenders welcomes the scheme.
She says: “I think this really shows that the mortgage market in the UK is not a black and white situation. It does involve lending on something that looks like more than a 100% LTV basis but the last thing we would want to see is a regulatory regime that precluded that being a sensible solution, this is a very pragmatic solution that lowers the risk for the lender.”
Colin Walsh, managing director of mortgages at Lloyds Banking Group, says: “The challenges facing first-time buyers receive a lot of deserved attention but to achieve a sustainable housing market, we have to look at every rung of the ladder. Many borrowers that bought their first home in more recent years have found their equity position hit hard by the period of house decline.
“It’s right that we can continue to help people buy their first home, but we shouldn’t underestimate the role Second Steppers have in making that happen. They’re 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 the first.”
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Readers' comments (17)
tcf | 27 Jan 2011 10:55 am
tcf?
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David Sheppard, Perception Finance | 27 Jan 2011 10:57 am
I recall Halifax doing this very same thing in the early 90's and it was popular then.
It is good to see that there is support for those in this situation even if it is only available on a direct basis.
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john n crisp | 27 Jan 2011 11:05 am
Deja vue or whay. I see we have now come full circle. Was 120% LTV not the root to the problems, or are LLoyds getting desperate
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Chris Simpson | 27 Jan 2011 11:08 am
This product will be about as popular as Andy Gray at a WI meeting!
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Lisa Williams | 27 Jan 2011 11:20 am
This is exactly the type of product where borrowers need to understand all the implications and costs so what do Lloyds do - make it direct only!
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Mike Fitzgerald | 27 Jan 2011 11:25 am
This new mortgage offering by Lloyds will not be the answer to all of the mortage industrys ills.However it is a small step in the right direction
We now need other lenders to increase their lending and hopefully this will help to get the UK economy moving
Mike Fitzgerald-The EMBA Group Ltd
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anon | 27 Jan 2011 11:39 am
tcf | 27 Jan 2011 10:55 am
what is the matter with you? if you are neg equity a lender taking a view is just what you need - or do you know best and using TCF as your patronising reason exclude them from the market? you know - those silly borrowers who dont know what on earth they are doing - what they need is a big dollop of TCF to make sure they dont get into problems.
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Des Platt | 27 Jan 2011 11:44 am
John n Crisp. This is not new borrowing. I am against borrowing over 90% but there are valid reasons why people who put 15% in and lost their equity in the last three years need to move house. There are enough obstacles to doing anything nowadays and this is a sensible move because the second time buyers are a big blockage at present. Not to do this would almost be as bone headed as Abbey who have twice refused clients of mine permission to down size to bigger equity and bigger affordability. One I won on a ppeal to God, one I didn't. It is refreshing to see a bank make a sensible decision. In recent months I have seen some great underwriting from Skipton, Leeds and Principality but just robotic decisions from banks.
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David Sheppard, Perception Finance | 27 Jan 2011 12:20 pm
I am amazed at some of the comments that have appeared on here but equally pleased that there have already been some robust responses.
For anyone to accuse Lloyds of either TCF failings or negligence needs to re-read the article and apply commonsense.
This product is built for those already in negative equity and will not allow any increase in the overall percentage situation as I see it so how is this in any way a bad thing. I would go further and say that to not allow someone unfortunate enough to be in this position the opportunity to move would be against TCF.
Once again, well done Lloyds.
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Anonymous | 27 Jan 2011 12:47 pm
I might be being overly simplistic but wouldn't using the deposit for the new property to reduce the current LTV also lessen the lenders exposure!
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