Nationwide offers 5% deposit deals

Building society’s new Save to Buy account will enable first-time home buyers to apply for 95% loan-to-value mortgages Latest news: House prices dip in roller coaster ride Nationwide building society is launching a savings account which enables first-time buyers to apply for a mortgage with just a 5% deposit. From Friday, those aspiring to buy their own home can open a Save to Buy regular savings account which pays interest of 2.5% gross on balances up to £20,000. After at least six months of saving a minimum of £50 a month, the saver is entitled to apply for one of the Nationwide’s 95% loan-to-value (LTV) ratio mortgages: until now these have only been available to existing Nationwide mortgage customers who want to move home. The Nationwide joins a very small band of lenders prepared to extend mortgages to those with a deposit of just 5% on a relatively straightforward basis. Most others require parents or other family members to act as guarantors on the loans, or to put their own money into savings accounts which can be set against the loans in case things go wrong. Nationwide currently offers a 95% loan fixed for three years at 6.29% and one fixed for five years at 6.89%, although the rates on offer will almost certainly have changed by the time first-time buyers qualify to apply. Those who go on to take out a Nationwide 95% LTV mortgage will also benefit from cash back ranging from £250 for those who save from £2,500 to £4,999, to £1,000 for those who save £10,000 or more. Save to Buy customers will also qualify for any Nationwide first-time buyer deals available at the time of application, such as the current offer of a £500 discount off the product fee. David Hollingworth of mortgage broker London & Country said aspiring buyers might be able to find better savings rates elsewhere, but added that the Nationwide’s entrance to the 95% LTV market was still very welcome. “The Nationwide is getting back to that old-fashioned condition of wanting to get some savings in and making sure the borrower is able to put money away each month. This is no bad thing,” he said. “The obvious downside is that saving in the Save to Buy account does not guarantee that you will get a mortgage. The Nationwide is simply saying that it will consider your application.” He said other lenders offering 95% LTV loans, including the Skipton building society and Yorkshire Bank , charge similar interest rates to the Nationwide, but he added that the lenders set strict criteria when considering applications. “It’s not easy to get one of these loans,” he said. First-time buyers are generally considered to be the driving force behind the housing market. Their buying of a property releases homeowners to buy bigger or more expensive property, and spurs a whole chain of shopping, from house paint to white goods, that helps support the economy. But their numbers have dropped over the past few years, as buyers have been forced out of the market by high house prices, low or non-existent salary increases and an unwillingness on the part of lenders to provide them with high LTV mortgages. The government has put pressure on lenders to increase the number of mortgages they are making available to first-time buyers, and launched a scheme to help such buyers in the Budget . The Firstbuy scheme is open to those with a household income of less than £60,000 a year who can put down a 5% deposit – but the catch is that the mortgage must be used to buy a new home. First-time buyers Mortgages House prices Consumer affairs Housing market Housing Jill Insley guardian.co.uk

Posted by on May 4, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.