Existing Natiowide customers in negative equity will have acess to a 95% LTV mortgage at 6.73% fixed rate for 3 years or 7.48% fixed rate for 5 years, with the option to borrow up to an additional 30% with rates increasing to 7.23% and 7.98% respectively.
The deal has been offered to borrowers since the beginning of last month and allows the transfer of any negative equity over from their existing mortgage to a new home.
A Nationwide spokesperson told the Guardian Newspaper: "It is a very niche offer. All we are doing is allowing them to carry across the negative equity they already have. It's not about additional borrowing or additional risk. The maximum borrowing we would consider is 125 per cent overall, but that doesn't mean someone can automatically get that."
Louise Cuming, head of mortgage at moneysupermarket.com commented:
"Three cheers for Nationwide: at a time when overly restrictive and cautious lending practices are holding the housing market back, Nationwide's flexible approach is to be welcomed.
Its new 125 per cent product will help its customers already in arrears but who need to move house. As Nationwide already has a relationship with these customers and visibility of their payment history they can ensure that they are extending these loans responsibly. And the truth of the matter is if the customer is in negative equity they already have a mortgage of greater than 100 per cent before Nationwide enables the customer to move house.
"Whilst we've been aware that some other lenders have been offering similar deals to Nationwide "under the counter", Nationwide is the first to promote it. Nationwide's move may force others to follow suit and apply similar creative thinking to help un-clog the housing market."
Andrew Hagger of Moneynet.co.uk comments:
"Many people will have become negative equity victims through no fault of their own and it is a positive move from the Nationwide who are quite rightly focussing on affordability criteria rather than applying an inflexible and restrictive LTV policy. It’s an effort to assist some of their loyal and valued customers.
These are far from normal times in the housing market and it is a positive move from the UK’s biggest mutual recognising the needs of their customers and coming up with a sensible ‘niche’ solution.
Let’s see if other lenders follow up with similar tailored solutions to assist customers with a proven repayment history and in the same predicament."
