Nationwide requiring min 25% deposits for new mortgages

brit1234

Just read this article in The Times. Looks like we are going to have to have to get a big deposit to buy at todays prices.:eek:

Nationwide blow to first-time buyers

Nationwide Building Society will no longer offer competitive mortgage deals to borrowers who do not have a deposit of at least 25 per cent. The move is part of a dramatic lending clampdown that the society blames on higher funding costs and a cooling housing market.

The lender will now charge 0.2 percentage points on loans above 75 per cent, virtually wiping out the benefits of the latest Bank of England base rate cut. A Nationwide spokeswoman said: "We have altered the tier structure for loans as part of our commitment to being a prudent and responsible lender and in response to the high cost of funding and a cooling housing market.

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"Our prices are simply reflecting market conditions."

The move deals a further blow to cash-strapped first-time buyers, for whom getting on the property ladder without a deposit has become almost impossible after the virtual extinction of 100 per cent mortgages. After an exodus of six big lenders, including Northern Rock and Alliance & Leicester, from the 100 per cent-plus market, only one, Dunfermline Building Society, still offers the deals. Scottish Widows Bank, which cornered the market for loans for up to 110 per cent to professionals and graduates, cut its maximum loan-to-value to 100 per cent this morning.

The new limits squeeze out the majority of homeowners, who on average borrow 80 per cent of their property's value, according to the Council of Mortgage Lenders.
Reducing the loan-to-value (LTV) limit shields mortgage lenders from falls in house prices, which can leave borrowers unable to pay off their loans.

Melanie Bien, director of the independent mortgage broker Savills Private Finance, said: "The move shows that even the biggest lenders are being forced to reassess their attitude to risk. Lenders are keen to attract borrowers with relatively low LTVs because they are regarded as being lower risk, and rewarding borrowers in this position with more competitive rates is one way of achieving that.

"It is good news for those with sizeable deposits but less encouraging for others, particularly first-time buyers, who don't have much in the way of a deposit." On a £150,000 home loan, a borrower would now be forced to save £37,500 to get a competitive rate of 5.68 per cent from Nationwide.

Before Friday the cheapest rates were available to borrowers taking out loans for up to 90 per cent, equivalent to £15,000 on the same loan size. The change will also affect existing customers who wish to remortgage with Nationwide.

Although the mutual will still offer loans for up to 95 per cent of a property's value, they will carry a much higher rate of interest, at 6.32 per cent for a two-year fix.
Nationwide traditionally lent only to prime mortgage customers. However, its strategy grew bolder in 2006, when it began selling near-prime loans, introduced better deals to borrowers with small deposits and began securitising its debt for the first time.

Brokers said that the clampdown represented a return to the "old days" of mortgage-lending, before competition in the market pushed loan-to-value limits up.
Ms Bien said: "It is a bit of a return to the old days, when much heftier deposits were required. But now they are chasing margin, not market share, so the emphasis has shifted back."

http://business.timesonline.co.uk/tol/business/money/property_and_mortgages/article3430815.ece

PasturesNew

brit1234 wrote: »

Just read this article in The Times. Looks like we are going to have to have to get a big deposit to buy at todays prices.:eek:

Yes, it's back to the good old rules of house buying where people couldn't write a figure on a piece of paper and get given it.

This is a good move. If everybody needs a 25% deposit .... oops, houses will have to be dirt cheap!

Doozergirl

There's already a thread on this exact article. It doesn't say you have to have a 25% deposit. It says you need a 25% deposit to obtain their best rate as opposed to a 10% deposit before.

gordonstights

Doozergirl wrote: »

There's already a thread on this exact article. It doesn't say you have to have a 25% deposit. It says you need a 25% deposit to obtain their best rate as opposed to a 10% deposit before.

Thank you for clarifying that. I wish people would post accurate information instead of scaremongering.

Doozergirl

gordonstights wrote: »

Thank you for clarifying that. I wish people would post accurate information instead of scaremongering.

Yes, it often helps if you read past the first sentence before you quote the entirity. :rolleyes:

hearts

gordonstights wrote: »

Thank you for clarifying that. I wish people would post accurate information instead of scaremongering.

Yeah but their whole point IS to scare monger. ;-) (is monger a word?)

rebeccaj

hearts wrote: »

(is monger a word?)

yes, it is

kunekune

Well the NW story was enough to make DH, a HPC zealot, move our goalposts yet again. I had accepted that we needed to save 10% (we STR but the house that was sold was in another country, with much lower prices), but he has now decided we need 25% deposit.

HOW many more years living in other people's houses, with the constant threat of having to move on? We have children, and it's important to be near good schools for them (this city does not have many, so ending up in the wrong catchment, or no catchment at all, on the date when we apply for secondary places, has serious consequences). I am fed up of not even being allowed to put up pictures on the wall. I am fed up of someone else's carpets and magnolia paint.

We are not young, no doubt what will happen next is that the banks will refuse to offer mortages to people over 45 and the goalpost will have been taken away altogether before we have a chance to settle properly. I feel like crying some days. It's my punishment from DH for wanting to move here, but 25%? That's another £35K. More than a year of my net salary.

Doozergirl

kunekune wrote: »

Well the NW story was enough to make DH, a HPC zealot, move our goalposts yet again. I had accepted that we needed to save 10% (we STR but the house that was sold was in another country, with much lower prices), but he has now decided we need 25% deposit.

HOW many more years living in other people's houses, with the constant threat of having to move on? We have children, and it's important to be near good schools for them (this city does not have many, so ending up in the wrong catchment, or no catchment at all, on the date when we apply for secondary places, has serious consequences). I am fed up of not even being allowed to put up pictures on the wall. I am fed up of someone else's carpets and magnolia paint.

We are not young, no doubt what will happen next is that the banks will refuse to offer mortages to people over 45 and the goalpost will have been taken away altogether before we have a chance to settle properly. I feel like crying some days. It's my punishment from DH for wanting to move here, but 25%? That's another £35K. More than a year of my net salary.

Have you read it properly? If you have a 10% deposit you'll pay 0.2% interest a year more than if you had a 25% deposit. That's all. It might be disappointing but it doesn't mean that you'd be stuck renting for any longer.

It does not say that you must have a 25% deposit.

Guy_Montag

It's a start though.

Still no excuse for bad reporting Brit1234

Generali

According to Nationwide's website, if you want a 2 year fix (goodness knows why but they seem to be very popular), you can fix at 6.25% with a 25% deposit and 6.32% with a 5% deposit.

So borrowing £100k with a 5% deposit will cost £671.84pm. With a 25% deposit will cost £667.45.

Generali predicts that Northern Rock winding down their mortgage book and the near-ending of the market for selling on mortgages will lead to higher interest rates paid on mortgages* but let's not get carried away with the article without looking at the substance behind it.





*Supply and demand innit. The price of a mortgage is the interest rate + arrangement fee.

If the supply of something falls and demand remains initially unchanged, it's price will rise and demand fall until supply = demand again.

If the supply of mortgages falls we expect the price to rise which will push down demand.