Nationwide offers 125% mortgage

In a surprise move, Nationwide Building Society is offering a new mortgage with a loan-to-value (LTV) ratio of 125%.

The deal is only available to existing customers who are in negative equity and need to move house. Even then borrowers will be selected very carefully.

The building society says it can provide a loan for 95% of the value of a new home at a fixed rate of 6.73% for three years, or 7.48% for five years.

Negative equity from the old home can be carried over at a higher fixed rate of 7.23% for three years, or 7.98% for five years.

Mortgages worth more than the value of a property were available before the credit crisis struck but have since become synonymous with “irresponsible lending”.

Prior to its near collapse in 2007, Northern Rock offered high LTV deals, including its 125% “Together” mortgage, which left bank particularly exposed in the recession and property market downturn.

However, Nationwide is only interested in supporting borrowers blighted by negative equity who need to move home, for work purposes for example, and the new offering is intended solely for this “niche market”.

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