Halifax have revealed that a mortgage offering first time buyers a loan with only a five per cent deposit, but with a huge interest rate was never supposed to make it onto the system.
The first time buyer mortgage, which charged 8% above the base rate, appeared on the intermediaries section of the banks website “by mistake” according to the company.
The mortgage also featured an early repayment charge which was the equivalent of a staggering 6% of the loan, and borrowers could borrow up to £7.5million.
Brokers were shocked at the offer that appeared on their system, as it would have made Halifax just the fifth lender to offer a mortgage with a 5% deposit. The other four mortgages offer interest rates ranging from 5.99% to 6.99% and are all fixed rate deals so the buyer is protected from interest rate increases in the next few years.
A mortgage expert from Obligo, Chris Gardner explained, “If this product had been genuine, it would have been the harakiri of home loans. Not only is the rate highly punitive but if rates rise then payments would become unmanageable almost instantly. This is the type of highly dangerous product, first-time buyers – or indeed any buyers – should steer clear of, given that rates can only go in one direction.”
David Hollingworth, a broker from London and Country revealed that he had been sceptical that the product was real as soon as he’d seen it. “There are very few 95% mortgages available, but this was not priced not to attract customers. It’s clearly designed to set alarm bells ringing if someone tries to process it as a genuine application.”
Halifax revealed that the loan was just a dummy product which was used for borrower’s applications when the original application they had made had seen a product drop from the market.
Halifax released a statement explaining, “There was an error this morning which resulted in three products incorrectly appearing on the Halifax Intermediaries website. These were products that are not live and were showing due to a systems error, which has now been corrected. The maximum LTV across the range, for new applications, is 90%.”
