Mortgages worth more than the value of a home seem to be making a comeback despite the credit crunch after Britain's biggest building society launched a 125 per cent loan.

The product's availability comes despite the much tighter lending criteria introduced by virtually all lenders in the wake of the credit crunch.

And the Financial services Authority is considering moves to limit mortgages to 100 per cent of a property's value.

Nationwide said the "very niche" product was aimed at homeowners trapped in negative equity who were keen to move house.

It is being offered only to the firm's existing mortgage customers whose house value is less than the mortgage on the property.

A Nationwide spokeswoman said the new deal had been available since early June.

She said: "It's not about additional borrowing or additional risk. The maximum borrowing we would consider is 125 per cent overall, but that doesn't mean someone can automatically get that.

"We would go through our normal procedures, looking at income, outgoings and so on."

Mortgages worth up to 125 per cent of house values were offered by doomed lender Northern Rock before it was rescued by the Bank of England in 2007.

Ray Boulger at mortgage broker John Charcol described Nationwide's new product as a "really consumer-friendly move", adding: "There are at least two other major lenders actively looking at introducing something similar for existing customers."

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