The now-riskier tranche of borrowing would turn toxic, with yields on it soaring as borrowers priced in the higher risk of default.
Often the only source of emergency cash is loan sharks, increasingly big business in Kenya, with borrowers signing ambiguous photocopied contracts and tying themselves into interest rates of 50% or more.
Nick Hopkinson of Property Portfolio Rescue, which buys houses from distressed buy-to-let borrowers, describes the Nationwide's reported increase as a "statistical blip" which would "not fool anybody who is struggling to sell their home or obtain realistic mortgage finance in the real world".
October 2014: Writes off £220m of loans to 375,000 borrowers.
Despite the fall in interest rates for borrowers, the volume of mortgage lending declined 10.4% in January from the month before, and was 3% lower than January 2012.
"It just shows how hard lenders are pushing to catch borrowers' attention at the moment," said David Hollingworth at mortgage broker London & Country.
Myriam Fernandez, head of European local and regional government ratings at S&P in Madrid, said: "The market is shut to some regional borrowers but not all.
"Moral hazard" is one of the key arguments often used against such an approach: allow reckless borrowers a get-out clause, and you give them an incentive to gorge on cheap debt in the good times.
The macro-prudential initiative is centred on the regulators asking the banks to limit their lending to borrowers who want to buy an investment property.
That spills over into the housing market, too, Rieder points out, where "the first-time home buyer demographic is synonymous with student loan borrowers".
"Admittedly, borrowers need to get past the tighter restrictions introduced as a result of the mortgage market review, and require a sizeable deposit in order to access the best mortgage deals, but if they can do this, then the rates on offer are spectacularly low," he said.
