An exclusive 125% mortgage deal will now be made available to existing Nationwide customers who are presently in negative equity but would like to move house.(Negative equity is when the value of a house is less than the amount they currently owe on their mortgage)
Nationwide have stated that the 125% mortgage deal is very much a niche offer and that not all of its customers that are in negative equity will qualify for the deal.
Currently the Nationwide building society is offering 85% mortgages to new customers.
Loans that are above 100% have already been focused on as “risky” and have come in for much criticism, especially when we consider those that were offered by the now nationalised Northern Rock Bank. Borrowers that choose the 125% mortgage deal will find themselves immediately in negative equity.
A Nationwide spokeswoman has said that the new 125% mortgage deal is “not about additional borrowing or additional risk”.
The new product would mean that borrowers would have the choice of taking on a loan of 95% of the value of their new property at an interest rate of 6.73 % for a period of three years or 7.48% for a period of five years. They could then add on to the loan any negative equity from their old property, which could be up to 30% of the value of their new home. They would then be given the choice of taking out an additional loan for this amount at a higher interest rate of 7.23% for a period of three years or 7.98% for a period of five years.
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