HBOS, part of Lloyds Banking Group, will offer a new Mortgage to their customers who are in negative equity and whose current deal is about to expire.
Usually such borrowers have the rate they pay change to the lender’s standard variable rate (SVR) and therefore unable to Remortgage if the new loan is more than the current value of the property as a result of the dipping house prices. Lenders are generally giving loans to 95pc of the property value, while borrowers looking for competitive loans need to borrow not more than 75% or 60%.
However, Halifax and Bank of Scotland, which are both part of HBOS, are providing loans at the rate of 95% to some remortgage customers who need to borrow more than the property value in some cases almost 120%. Brokers said they believed that HBOS is the only important lender to give this option to people in negative equity with 120% remortgages. Melanie Bien of Savills Private Finance complemented HBOS and said that it is doing the best thing by ensuring that existing customers who are in negative equity can still get a fixed rate. With most lenders borrowers are stuck with standard variable rate which is less at the moment but most likely it is expected to rise in the next year and those who fail to remortgage elsewhere are caught on a spiraling rate. She also hopes that other lenders follow the good deed of HBOS. David Hollingworth of London & Country Mortgages is also happy with the deal provided by HBOS. He said that lenders are at leaset coming forward to give customers some option other than SVR when they are reaching the end of the existing deal.
He also added that this is a noble service for existing borrowers who cannot remortgage anywhere else. While many would like to stick on the lender’s SVR since it is low at the moment, it is good that lenders are offering borrowers the power to protect themselves against future rate hikes.
A spokeswoman for Halifax said that when their borrowers come to the end of their existing product rate, they work with them individually to determine the various options available to them.