That's fucking stupid

Posts Tagged ‘nationwide’

The UK’s Nationwide building society is going to be offering (to a few select customers) mortgages of up to 125% of the value of a property.

Technical bit for mortgage nerds like me: 95% LTV on a new property while carrying over up to 30% of the value of an existing property, with a 7 or 8% fixed rate for the first 3 or 5 years respectively.

Let’s look at the facts, shall we?

• UK house prices are slowly falling
• The customers they are targeting are in negative equity (i.e. the amount they owe the bank is more than the value of the property they’re in)
• If a borrower simply waits for the housing market to settle down (and pays off the mortgage as usual), then the equity will eventually sort itself out. This requires patience.
• UK consumers have no patience.
• Whenever a bank arranges a new mortgage, they earn an arrangement fee.
• Whenever a bank arranges a new mortgage, they get to set a new higher profit interest rate. Which means that the borrower will not owe more money, but they will have to pay back more money.

Trebles all round, eh?