New 125% mortgage could help avoid repossession, expert notes

Offering borrowers mortgages worth more than the value of their new property can help Britons deal with negative equity and thereby reduce the risk of repossession, one expert has stated.

With growing numbers of people returning to the UK property market after months of stagnation, Nationwide recently announced the launch of a new 125 per cent loan-to-value mortgage.

The product will be made available to certain existing customers who find themselves in negative equity yet still want to make a move, with some observers welcoming this development as good news for consumers keen to avoid the threat of repossession.

Paul Holmes, chief executive of Firstrung, said the building society is attempting “to find a way for their existing customers to be able to stay with them on a very low interest rate, as opposed to sending them threatening letters … or repossessing the property”.

The Bank of England has estimated that as many as 11 per cent of all UK homeowners are in negative equity.

By David Hewitt

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