Halifax to rescue borrowers in negative equity with 120pc remortgages

One of Britain's biggest mortgage lenders is offering loans of as much as 120pc of the property value to existing customers coming to the end of their current deal.

HBOS, which is part of Lloyds Banking Group, will consider offering a new mortgage to customers in negative equity whose existing deal, such as a fixed rate, is about to expire.

Normally such borrowers would see the rate they pay revert to the lender's standard variable rate (SVR) and would be unable to remortgage if the new loan were greater than the current value of the property as a result of the decline in house prices.

Lenders are generally restricting loans to 95pc of the property value, while borrowers wanting the most competitive deals need to borrow no more than 75pc or even 60pc.

But Halifax and Bank of Scotland, which are both part of HBOS, are offering the rates on 95pc loans to some remortgage customers needing to borrow more than the property value – up to 120pc of the value in some cases.

"HBOS told us they were doing this [offering 'negative equity' loans] earlier this month for borrowers with up to 120pc LTV [loan to value] deals, although they also said that this would not be publicised anywhere," one mortgage broker told The Telegraph.

Brokers said they believed HBOS to be the only major lender offering this option to customers in negative equity.

Melanie Bien of Savills Private Finance said: "HBOS is doing the decent thing, ensuring that existing customers who are in negative equity can still get a fixed rate.

"With other lenders, such borrowers are stuck on the standard variable rate, which is fine when such borrowing is cheap – as it is at the moment. But rates are likely to rise quickly next year, and those who can't remortgage elsewhere will find they are stuck on a spiralling rate."

She added: "By giving existing customers access to a fixed rate normally available only to those borrowing at 95pc LTV, HBOS is putting borrowers first and treating them fairly. We hope that other lenders follow its good example."

David Hollingworth of London & Country Mortgages, another broker, said: "It's very encouraging to see lenders looking after their existing borrowers by at least giving them some kind of product choice other than standard variable rate when they reach the end of their existing deal.

"With lending so restricted these days, borrowers who have slipped into the higher loan to value brackets as a result of falling house prices will find that options are limited at best and more likely non-existent from other lenders. Halifax is enabling existing borrowers to take advantage of the rates tagged for 95pc LTV even if their current loan to value has increased beyond that and can be up to 120pc. Halifax offers rates fixed for four or five years, currently available from 5.19pc."

He added: "This is a good service for existing borrowers who frankly will not be able to go anywhere else. While many may like the idea of sticking on the lender's SVR while it is currently low, it is good that lenders continue to offer borrowers the ability to protect against future rate rises."

A spokeswoman for Halifax said: "When our borrowers come to the end of their existing product rate, we work with them on a case-by-case basis to determine the product options that are available to them."

Source: Telegraph