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.