The 125% mortgage was seen as one of the products on the more foolish side of the pre-crunch deals, and largely attributed to the downfall of Northern Rock. However Britain’s biggest building society has now reintroduced it, calling it a “very niche” product.
Nationwide has said that the mortgage is only available to existing customers in negative equity who want to move home and borrow more.

These customers would be offered the building society’s 95% LTV deals, with rates of 6.73% fixed for three years or 7.48% fixed for five years. Interest rates for the additional borrowing of up to another 30% then rise to 7.23% and 7.98% respectively.

A Nationwide spokeswoman defended the deal, saying: “All we are doing is allowing them to carry across the negative equity they already have....