Nationwide launches negative equity mortgage

Nationwide is offering a 125% mortgage to help existing customers in negative equity.

The offer has raised eyebrows in some quarters, after Northern Rock received widespread criticism for its own 125% mortgage deal.

Existing mortgage customers who want to move will be able to borrow up to 125% of the value of a property, enabling them to use the additional cash to make up for any negative equity.

Nationwide says the deal is very ‘niche' and will only be offered to a small proportion of borrowers in negative equity.

The product consists of a 95% mortgage loan, with fixed rates of three or five years, an additional 30% can then be borrowed based on any negative equity in the borrower's existing home, charged at a higher rate.

Northern Rock was widely criticised for its own 125% mortgages, called the Together Mortgage, which has seen high levels of arrears and repossession since the housing bubble burst.

Nationwide insists it will only lend responsibly, examining outgoings and earnings to assess affordability.

New Nationwide borrowers will continue to be limited to borrowing 85% of a property's value.