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Nationwide Building Society’s decision to allow customers to take out loans worth 125 percent of the value of the homes they are buying shows that lenders are innovating to help borrowers struggling in the property market.
The Nationwide deal - which is only available to existing customers in negative equity who want to move house - enables borrowers to take out a loan for 95 percent of the value of their new house at a fixed rate of 6.73 percent for three years or 7.48 percent for five years.
Borrowers would then be able to add on the negative equity from their old home, up to another 30 percent of the value of the new property, at a higher fixed rate of 7.23 percent for three years or 7.98 percent for five years.
Francis Ghiloni, commercial director at RealPriceComparison, said: "The innovation in lending and the help being given to struggling borrowers is to be welcomed. However, it is concerning that the interest rates are in excess of 6.7 percent. This fact once again emphasises that borrowers are having to pay a hefty price to get a fixed-rate deal at the moment. When the Bank of England base rate is at 0.5 percent, consumers will find it difficult to understand why some mortgages are costing 6 percent or more."
Tagged in Mortgages