The Consumer group Which? are advising people to avoid the new BM Solutions Mortgage Plus product. The product combines a secured and unsecured loan, which can add up to 125per cent of the value of the property, which would put you in the position of having negative equity.
However, other financial experts have criticised the stance that Which? has taken, as they believe that BM has offered a good product, which is only available through intermediaries, to borrowers who meet a certain criteria. Which? have defended their actions, as they would prefer people to collect a deposit before purchasing property, as it may be sometime before the value of the house equals the amount that they have borrowed.
Our view
This is a tough one. We understand the concerns that Which? has raised. You could be in a negative equity position before you even get started. But there will always be extenuating circumstances where people need to borrow more than they really should. It is a little like Abbey’s ‘5 Times Income’ mortgage. For some, it is necessary, for others they can mis-understand the risks involved by clever marketing. It is all a question of both providers and the public being responsible. The problem is none of us rarely is!