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Nationwide defends mortgage launch

12:01pm Thursday 9th July 2009

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Nationwide defended the launch of its 125% mortgage saying the loan offered a "socially responsible and prudent" solution to people in negative equity.

The group said the "very niche" product was only available to existing borrowers who needed to move home, but who owed more on their mortgage than their property was worth.

Under the terms of the deal, customers in this situation will be able to borrow up to 95% of the value of their new home, with them still needing to put down 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: "You cannot borrow more than 125% of the property's value.

"The risk to us cannot be greater than it was on the previous property, because the borrower has put in some money, there is no greater exposure for us.

"We are doing something socially responsible and prudent."

He added that the group had received only a handful of inquiries about the product since it was launched in June.

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