Nationwide has brought back the 125% home loan, but said eligibility would be strictly limited.

Nationwide, the UK’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% of the value of their new home at a fixed-rate of 6.73% for three years on payment of a 5% deposit. They can then add the negative equity in their existing property to the loan, capped at 30% of the value of the new home, at a three-year fixed rate of 7.23%. Nationwide said it had introduced the loan in June in response to the ‘unique circumstances’ of some customers.

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.