The building society, which is one of the UK’s biggest mortgage lenders, said it was making the move in order to ensure borrowers could afford mortgage payments and did not go into negative equity should house prices fall.
It means first-time buyers, home movers and remortgaging customers who are not existing mortgage members with Nationwide and need to borrow more than 85% of the value of the property will not be eligible for a loan.
This will be a blow to many first-time buyers who are most likely to be purchasing with a deposit of less than 15%.
Existing customers, meanwhile, would continue to benefit from a maximum 95% LTV if they switch deals providing they do not increase the LTV. Nationwide will also consider applications from existing mortgage customers moving home where the LTV is above 85%.
Henry Jordan, director of mortgages at Nationwide Building Society, said: “The outlook for the mortgage market and house prices remains uncertain.
“As a responsible lender we must factor this uncertainty into our lending assessments, which is why we have taken the decision to reduce our maximum LTV for new business.
“Our priority at this time must be to help members keep their homes. As such, we need to ensure our members can afford their repayments, while doing what we can to protect them from falling into negative equity.”
Nationwide said it would keep the situation ‘under review’ but hoped to return to normal lending in the ‘near future’.
Impact of pandemic
A number of mortgage lenders have pulled out of the ‘high LTV’ market in recent months, prompted by similar concerns to Nationwide.
Indeed, data out today from mortgage technology experts, Mortgage Brain, revealed product numbers dropped sharply following the start of the lockdown and are currently 40% lower than the nine-week average to 16 March.
Borrowers with low deposits who are concerned about finding loans during these difficult times should speak to a broker which covers the whole of the market. This will help them identify the lenders still offering products to borrowers with small deposits.
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