Nationwide has introduced a new 125% mortgage for existing customers in negative equity.

Building society Nationwide is now offering 125% mortgages to existing customers in negative equity.

Customers who find themselves in negative equity and wish to move house will be able to take out a loan worth 125% of the value of their chosen house.

Negative equity is defined as the value of a home being less that the amount owed on the mortgage.

The offer will only be given to customers in certain circumstances and not every customer in negative equity would qualify for the special mortgage.

Nationwide currently only offers new customers mortgages worth up to 85% of the value of a home.

Under this new product, borrowers could take out a 95% loan on a new house at a fixed rate of either 6.73% for three years or 7.48% for five years. Negative equity up to 30% could then be added at a higher fixed rate of 7.23% for three years or 7.48% for five years.

A Nationwide spokeswoman told The Guardian newspaper that the deal was “not about additional borrowing or additional risk.”

She added: “It is a very niche offer. All we are doing is allowing them to carry across the negative equity they already have. The maximum borrowing we would consider is 125% overall, but that doesn’t mean someone can automatically get that.”

Mortgage lenders came under fire at the start of the economic crisis for the offer of 100% loans on homes.