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Nationwide offers 125% mortgage | Nationwide offers 125% mortgage |
(about 7 hours later) | |
Nationwide Building Society has introduced a mortgage allowing borrowers to take loans worth 125% of the value of the home they are buying. | Nationwide Building Society has introduced a mortgage allowing borrowers to take loans worth 125% of the value of the home they are buying. |
It will only be available to existing customers in negative equity who want to move house. | It will only be available to existing customers in negative equity who want to move house. |
Negative equity means that the value of someone's home is worth less than the amount they owe on their mortgage. | Negative equity means that the value of someone's home is worth less than the amount they owe on their mortgage. |
Nationwide said the deal was a very "niche offer" and that not everyone in negative equity would qualify. | |
The Financial Services Authority is considering limiting mortgage loans to 100% of a house's value. | The Financial Services Authority is considering limiting mortgage loans to 100% of a house's value. |
'No more risk' | |
Nationwide only offers new customers mortgages worth 85% of the value of the home they want to buy. | Nationwide only offers new customers mortgages worth 85% of the value of the home they want to buy. |
There has been much criticism of the loans above 100% that were available at the peak of the housing boom, which immediately placed borrowers in negative equity. | There has been much criticism of the loans above 100% that were available at the peak of the housing boom, which immediately placed borrowers in negative equity. |
Under Nationwide's new product, borrowers would take out a loan for 95% of the value of their new house at a fixed rate of 6.73% for three years or 7.48% for five years. | Under Nationwide's new product, borrowers would take out a loan for 95% of the value of their new house at a fixed rate of 6.73% for three years or 7.48% for five years. |
They would then be able to add on the negative equity from their old home, up to another 30% of the value of the new property, at a higher fixed rate of 7.23% for three years or 7.98% for five years. | They would then be able to add on the negative equity from their old home, up to another 30% of the value of the new property, at a higher fixed rate of 7.23% for three years or 7.98% for five years. |
A Nationwide spokeswoman said that the deal was "not about additional borrowing or additional risk". | |
"It is a very niche offer. All we are doing is allowing them to carry across the negative equity they already have," she told The Guardian. | |
"The maximum borrowing we would consider is 125% overall, but that doesn't mean someone can automatically get that. | |
"We would go through our normal procedures, looking at income, outgoings and so on." | |
The deal was a "really consumer-friendly move" said Ray Boulger at mortgage broker John Charcol . | |
He added that at least two other major lenders were looking at introducing something similar for existing customers. |