Offer is aimed at homeowners in negative equity seeking to move house

The Nationwide building society has introduced a mortgage worth 125% of the value of the home being purchased.

It is aimed at existing customers in negative equity who want to move house.

The Financial Services Authority (FSA) is considering limiting the amount of money consumers can borrow to the full value of a property.

Under the Nationwide scheme, 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.

Then they would add on the negative equity from their old home - to 30% of the value of that 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.

Topics