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Nationwide’s 125% mortgage.

You may have seen reports that the Nationwide Building Society is bringing back 125% mortgages09-07-2009
You may have seen reports that the Nationwide Building Society is bringing back 125% mortgages – that is loans of a quarter more than the value of the properties they’re being used to buy.

These high ‘Loan to Value’ mortgages are blamed by some for getting us into a sticky mess with the housing market in the first place. But if you read the details of this loan there seems no reason to believe that irresponsible lending is making a comeback.

The Nationwide will only offer this mortgage to existing customers who are in negative equity (the value of their home is less than the amount they borrowed to buy it) but need to move. New customers won’t be eligible. They have to put down a deposit of at least 5% of the value of the property they’re buying and can borrow a maximum of 95% of its value.

Nationwide says the 125% loan will be available from the 10 June 2009 for existing customers who:

- -        are in negative equity

- -        need to move home

- -        meet strict lending criteria and

- -        have a good credit record.

Borrowers in these circumstances will be able to transfer part of their existing negative equity with them when they need to move home. Both the main loan and the associated negative equity top-up are restricted to three and five year fixed rate deals:

       *       Main loan up to 95% LTV: 6.73% (3 year fixed) and 7.48% (5 year fixed)
       *       Top-up loan covering 100-125% LTV: 7.23% (3 year fixed) and 7.98% (5 year fixed).

Other lenders are said to be considering offering similar deals to get the market moving again but the Nationwide says it doesn’t expect demand to be high.  

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