Nationwide’s 125% Mortgages Criticised
July 10th, 2009 by 
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Nationwide Building Society yesterday defended the launch of their new 125 % mortgages.
They said the loans offered a “socially responsible and prudent” solution to people in negative equity.
The building society said the “very niche” product was only available to existing borrowers who needed to move, but owed more on a mortgage than their property was worth.
Customers will be able to borrow up to 95 % of the value of their new home, with a 5% deposit.
They will then be able to transfer the negative equity on their former home to the new property, as long as it does not exceed 30 % of the new home’s value.
Borrowers will be offered a three-year fixed rate mortgage at 6.73 % or a five-year one at 7.48 % on the 95 % portion of the mortgage. Interest charged on the negative equity part of the borrowing rises to 7.23 % and 7.98 % respectively.
A Nationwide spokesman said: “We are doing something socially responsible.”
Mortgages that enabled people to borrow more than their home was worth have come in for heavy criticism since the demise of the Northern Rock.
But Louise Cuming, of moneysupermarket.com, said: “Nationwide’s flexible approach is to be welcomed.”
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