Nationwide revives 125 percent mortgage

By Myles Neligan

LONDON (Reuters) - Nationwide has brought back the 125 percent home loan, seen as a symbol of the reckless lending that contributed to the banking crisis, but said eligibility for the deal would be strictly limited.

Mutually-owned Nationwide, the country's third-biggest mortgage lender, said the loan is available only to existing customers with good credit history who wish to move house, but are holding back because their mortgage exceeds the value of their current property.

Under the deal, customers can borrow 95 percent of the value of their new home at a fixed rate of 6.73 percent for three years on payment of a 5 percent deposit.

They can then add the negative equity in their existing property to the loan, capped at 30 percent of the value of the new home, at a three-year fixed rate of 7.23 percent.

Nationwide said it had introduced the loan last month in response to the "unique circumstances" of some customers.

"The society does not anticipate, and has not seen, a great demand for this service," the lender said.

NARROW APPEAL

Analysts said the deal would appeal only to a small number of people, and did not mark a return to the profligate lending practices that stored up billions of pounds in bad debts on banks' balance sheets during Britain's ten-year house price boom.