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Nationwide reintroduces the 125% mortgage

While the headline looks controversial and in total contravention of recent UK government guidelines, Nationwide has today announced a 125% mortgage aimed at those with negative equity. While the 125% mortgage figure will send tremors down the spines of UK regulators it is perhaps not as bad as it looks at first glance.

The offer will only be available to a minority of current Nationwide mortgage holders who have slipped into negative equity and want to move home. Those who pass the stringent criteria for the deal would be offered a 95% standard mortgage on the value of their new home with the additional 30% offered at a higher rate. To give an example, a mortgage customers taking out a three-year fixed rate would pay 6.73% on the first 95% of the mortgage and 7.23% on the remainder of the mortgage up to 125% of the value of the property.

Even though this will be a godsend for those who have slipped into negative equity it will not be widely available and will only be promoted in-house by Nationwide. At this moment in time it seems highly unlikely that any of the other major mortgage players in the UK market will follow suit.

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