125% Mortgage Offered By Nationwide

Nationwide building society has introduced a new 125% mortgage deal for its existing customers. But is this deal all it looks or is there a sting in the tail when most lenders are typically looking for large deposits from their customers.

The 125% mortgage is for those existing customers, of which there are thousands, allowing them to move and take over with them the balance of their negative equity. At first glance this seems attractive but the building society still want a 5% deposit so offer 95% LTV. Taking negative equity into the equation the total loan must not exceed 125% of the value of the new property. So the customer still needs to find a 5% deposit to take up the 125% mortgage.

125% Mortgage Rates

The sting in the tail are the rates associated with this deal which comes as either a three or five-year fixed rate mortgage. They break down as follows -

3yr fixed rate: First 95% of the loan is set at 6.73 per cent, then 7.23 per cent on the negative equity which is carried over from the previous property.

5yr fixed rate: First 95% of the loan is set at 7.48 per cent, then 7.98 per cent on the negative equity which is carried over from the previous property.

Customers taking up this new 125% mortgage will be paying a much higher rate than current fixed rate deals making this an extremely expensive deal. This could be a positive move for those who have to move and find themselves in negative equity, but the high rates may not attract those considering a move but could just as easily hold on until the market picks up. This 125% mortgage is really a niche product.