In response to the rising number of homeowners that have fallen into negative equity since the house price crash in the UK one leading lender has re-introduced the 125 percent mortgage.

The Nationwide has launched the 125 percent mortgage recently to try and help struggling customers whose properties are now worth less than the amount that they owe on them. However, the offer will only be available to existing mortgage customers of the lender, and even then not everyone will qualify.

Customers of Nationwide that are in negative equity but need to move house may find that they are eligible for the 125 percent mortgage. These mortgages were once widely available from a wide range of lenders, and were very popular with first time buyers who had little or no money to put towards their first home. However, since the onset of the global credit crunch these mortgages, and even the popular 100 percent mortgages, have disappeared from the shelves.

An official from the lender said that the deal had been launched to help customers that were struggling under specific circumstances. She said: ‘This is for people in a very specific circumstance: Nationwide borrowers in negative equity who want to move home.’

In order to qualify for the mortgage customers will have to undergo stringent affordability tests to see whether they really need the 125 percent mortgage in order to cope financially.

It is thought that many borrowers who took out mortgage loans of 90 percent or more of the property value over 2006 and 2007 may be in negative equity due to the level by which property prices have fallen since their peak in 2007.

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