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Lloyds misses a trick by not offering brokers negative equity deal

Lloyds Banking Group has launched a new option for existing mortgage customers affected by negative equity. 

Research from the UK’s biggest mortgage lender indicates that next time buyers, or second steppers as Lloyds has tagged them, face as many challenges as those first time buyers to whom they hope to sell.

Having made their first purchase in the last few years, many will now find that their equity has been eroded by falling house prices, in some cases to the extent that they are now in negative equity. 

Those that don’t need to move will hope for improvement in prices and in the meantime look to overpay and cut their mortgage more quickly.

However, some borrowers will need to move to relocate for work reasons or in order to accommodate a growing family.  Those borrowers often either have to meet the negative equity from savings or perhaps look to alternative solutions such as letting the property out.

The Lloyds Equity Support Scheme allows the borrower to take their existing Lloyds mortgage with them to a new property. 

No additional borrowing is available, so if trading up the customer would have to put additional funds down but it does mean that their cash deposit isn’t decimated by having to plug the negative equity gap. 

The downside is that just as with Lloyds’ Lend a Hand scheme it isn’t going to be made available to the broker market.  Although it’s great to see some new solutions being put together, brokers would be ideally positioned to help consumers not only in evaluating a possible option but also facilitating the move. 

However, this product isn’t going to work for everyone but it is to be welcomed as a new mortgage option for those that really need to make a house move out of necessity.  Anything that can help unclog the market has to be a step forward that will hopefully encourage others to do the same.

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  • Lloyds tsb mortgage advisor 14th February 2011 at 9:40 pm

    What carefully considered advice can be provided when no other lender in the current market will be able to assist? surely the exact right people to provide the advice are Lloyds themselves being as its us that will be underwriting the deal and consequently making the decision to lend/port? why complicate matters by having a 3rd party involved? No doubt most brokers would charge the customer a fee for ultimately the same outcome as speaking to us direct so I really see no benefit other than to the broker in opening this option up to the intermediary market? I would also like to add for the record LLoyds advisers are able to provide a full advice and recommendation service to our customers.
    Regards Lloyds advisor

  • Tim Hague 4th February 2011 at 10:55 am

    I understand where David is coming from. Those customers that have a need for this product are in complicated circumstances at that calls for carefully considered advice. I’d be surprised if Lloyds’ risk & compliance people haven’t thought about the implications from a future claims perspective.

    Surely offering this product through the broker community would help to improve the quality of advice dispensed and spread the risk for the lender?

  • Dennis Jason 3rd February 2011 at 10:44 am

    David,

    I think you’ve missed the point on this – this won’t be business lloyds wants to do – no lender wants greater than 100 % LTV lending on their books – but if you;ve got it it makes sense to allow people to move – particularly if it keeps them working and paying the mortgage. This is not Lloyds wanting to do > 100% ltv lending but helping people already in that position – good on them

  • Michael Wells 2nd February 2011 at 5:30 pm

    I am a successful mortgage broker and don’t see how ‘Lloyds have missed a trick’ by not allowing brokers to utilise this product.

    They are only offering it to their own customers and therefore it’s a captive market and thus they will not lose much business as a result.