The deal will allow a select number of existing Nationwide borrowers in negative equity to move to a more expensive property and carry over any negative equity.
The borrower can still only borrow up to 95 per cent of the value of the new property, so does need a 5 per cent deposit. They can carry over their negative equity, provided the amount carried over does not make the total proposition exceed 125 per cent of the value of the new property.
For example, if the borrower’s current property value is £200,000, but has a mortgage of £220,000, they can move to a property worth £250,000 as long as they have the £12,500 deposit. Nationwide will then carry over the £20,000 negative equity, meaning the new mortgage will total £257,500 – which would be a 103 per cent mortgage.
For the three-year mortgage the rate is 6.73 per cent on the first 95 pr cent of the loan, and 7.23 per cent on the negative equity carried over from the previous property.
For the five-year mortgage the rate is 7.48 per cent on the first 95 per cent, and 7.98 per cent on the negative equity.
Nationwide says borrowers will need to go through normal affordability checks to ensure they can afford the loan. It is stressing that it is not relaxing criteria.
Moneysupermarket.com head of mortgages Louise Cuming says: “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.
“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.”