Nationwide has launched a 125% LTV product for existing borrowers in negative equity.
The UK’s largest building society says however that it does not anticipate, and has not seen, a great demand for this service.
The product will only be available to those existing customers who are in negative equity, need to move home, meet Nationwide’s ‘strict’ lending criteria and have a good credit record.
The maximum LTV for existing customers taking a new deal at Nationwide remains at 95%.
Andy McQueen, director of mortgages at Nationwide said: "Nationwide is a responsible lender and our negative equity policy is an appropriate and prudent response to market conditions and demonstrates our continued commitment to supporting our customers."
Andrew Hagger of Moneynet.co.uk welcomed the move.
He said: "No doubt shudders reverberated through news desks up and down the country when word got out that 125% mortgages were back on the agenda. However the Nationwide deal is certainly not a return to the days where we saw similar LTV loans available via the likes of the Northern Rock ‘Together’ product.
"Nationwide is using this product to help existing customers who need to move home but due to the fall in property prices now find themselves stranded in a negative equity situation.
"Whilst there is undoubtedly increased risk for the lender, this is built into the pricing however the borrowers in question will already have a solid track record with the society and proved over a period of time that they can afford the monthly repayments.
"Many people will have become negative equity victims through no fault of their own and it is a positive move from the Nationwide who are quite rightly focussing on affordability criteria rather than applying an inflexible and restrictive LTV policy. It’s an effort to assist some of their loyal and valued customers.
"These are far from normal times in the housing market and it is a positive move from the UK’s biggest mutual recognising the needs of their customers and coming up with a sensible ‘niche’ solution.
"Let’s see if other lenders follow up with similar tailored solutions to assist customers with a proven repayment history and in the same predicament."