Money News

Nationwide offers 125% mortgages

Britain’s biggest building society has resurrected the 125% mortgage for existing customers who want to move house.

Nationwide (www.nationwide.co.uk) is offering up to 125% loan-to-value (LTV) mortgages to customers who are in negative equity but need to move house.

The deals are designed to help borrowers who would otherwise be trapped and unable to move because their mortgage is worth more than the value of their property. They allow homeowners to “carry over” the negative equity from their existing property to their new property.

Nationwide told The Guardian that this “niche” product, would only be available to its existing mortgage holders - is not an option for new customers or those looking to remortgage without moving home.

Customers that meet the eligibility criteria will be offered Nationwide’s 95% LTV deals, with rates of 6.73% fixed for three years or 7.48% fixed for five years. For additional borrowing above this, the rates will rise to 7.23% and 7.98% respectively.

Chris Eagle, commercial manager at CreditChoices.co.uk: “This deal is good news for Nationwide customers and could prove to be a lifeline for people who are trapped in negative equity and need to move house.

“It’s not about encouraging additional borrowing, but rather about helping consumers cope with dramatic house price falls.

“Experts are suggesting that other lenders are considering similar offers, which is encouraging news for anyone worried about negative equity.”

The latest house price survey from Halifax yesterday suggested that the average house price fell 0.5% in June, taking the annual decrease to 15%, although the Nationwide house price index found that the average house price rose by a seasonally-adjusted 0.9% in June.

In May, the Council of Mortgage Lenders (www.cml.org.uk) estimated that nearly one million households were already in negative equity.