Nationwide raises minimum deposit to 25%
Nationwide has announced that it is increasing the minimum deposit needed to secure its best interest rates from 10% of the value of the property to 25%.
[UKPRwire, Wed Feb 27 2008] Nationwide has announced that it is increasing the minimum deposit needed to secure its best interest rates from 10% of the value of the property to 25%.
With the average price of a London property now over £300,000, this means that buyers will have to come up with a deposit of at least £75,000 or face a higher mortgage (an extra 0.2% of interest).
Nationwide had previously offered borrowers one interest rate for mortgages of up to 90% of a property’s value, and another for 90% to 95% LTV (loan to value: the ratio, expressed as a percentage, of the amount of a loan to the value or selling price of a property).
Now it will offer its best rate to those borrowing only up to 75% of a property’s value.
Nationwide’s move comes as building societies and banks tighten lending conditions in the wake of the credit crunch. Some industry analysts speculate that sooner or later all lenders will back out of buy-to-let agreements in particular, given current market conditions – including falling prices and insufficient yields that often cannot cover payments. Nationwide spokeswoman Zoe Stevens confirmed that in such a market it was appropriate for the building society to price its products according to risk: “Our costs of funding are higher and, like all lenders, we have to adapt to changes in the market place,” she said.
The rise affects only new borrowers and eliminates any benefit they might have had from this month’s cut in interest rates by the Bank of England.
The news will also come as a blow to buy-to-let investors, who tend to juggle their credit arrangements and squeeze more equity out of each property in order to finance new deals.
Overall, the housing market continues to face a gloomy outlook, as house prices fell for a fifth consecutive month in February. Lawrence Smith of Decision Homebuyers commented that “although some buyers may be cautiously entering the market again, it is unlikely that this will result in any change to the downward trend of house prices in the near future”.
For press enquiries, please contact Phil Rendall on 020 7099 9026
News provided by Decision Homebuyers, a leading UK property company providing a quick and simple solution for selling your home, no matter what the condition.
Decision Homebuyers carries out daily surveys of the national media to provide up-to-date news and commentary on the UK property market.