UK building society Nationwide is offering 125 percent mortgages to its existing customers that have fallen into negative equity and need to move home.
The mortgage lender insists the move does not signal a return to the risky bank lending which caused the subprime crisis, even though the new loans would be worth far more than the value of the homes they use as collateral.
“Nationwide is a responsible lender and our negative equity policy is an appropriate and prudent response to market conditions and demonstrates our continued commitment to supporting our customers,” Andy McQueen, director of mortgages at Nationwide, said.
The underwater customers would be able to carry over their negative-equity loan when they move home, but only customers that meet Nationwide’s “strict lending criteria” and have a good credit record will be accepted, the lender said in a statement.
Nationwide, which has not advertised widely its offer, said it does not anticipate high levels of demand for the service and hasn’t seen much pickup since the product’s launch in June.