Nationwide to offer mortgages to first-time buyers with 10% deposits

The move comes in response to the introduction of a stamp duty holiday which will see the tax frozen on properties up to £500,000 until March 2021.

Nationwide said the government’s decision to freeze stamp duty, combined with increased activity in the housing market following the lifting of lockdown restrictions, had provided an opportunity for the building society to return to ‘higher LTV lending’.

In this case, by ‘higher LTV lending’ Nationwide is referring to loans of 90% loan-to-value which means the borrower needs a loan for 90% of the property’s value, and therefore has a 10% deposit.

One of the criticisms of the stamp duty holiday was that it did not support many first-time buyers since they already benefit from stamp duty relief.

What’s more, many first-time buyers would be unable to move anyway as the pandemic has led to many lenders pulling their high LTV products for those with small deposits or equity.

Nationwide hoped its mortgage offering would plug this gap.

Henry Jordan, director of mortgages at Nationwide Building Society, said: “First-time buyers are vital to breathing life into the housing market and economy. We understand one of the biggest barriers to homeownership is raising a deposit.

“As a building society, owned by our members, we are extremely well placed to look at ways of helping people into a home of their own. While we will continue to monitor the market carefully, we feel it is the right time to enhance our lending, initially to those looking for their first home.

“We welcome the government’s announcement on stamp duty and hope our combined changes create a positive impact on a market that, despite being in relatively good health, is still recovering.”

The building society’s 90% LTV mortgages for first-time buyers will be available direct with Nationwide as well as via brokers. 

The lender said it would continue to review the market and its products to ensure it was lending responsibly at the same time as helping first-time buyers achieve their housing goals. As such strict borrowing rules will apply.

Existing members who were moving home would be able to continue to benefit from up to 95% LTV borrowing. For further advances the maximum had increased to 90% LTV.

Property demand

Miles Shipside, commercial director and housing market analyst at Rightmove, added: “The stamp duty holiday is of limited benefit to those first-time buyers who are already exempt from it in many parts of the country, and so Nationwide’s return to 90% loan-to-value is likely to help significantly more for those trying to get their first step on the ladder.

“There’s been record demand for property on Rightmove since the market reopened which has been boosted even further by the stamp duty announcement, all of which should help activity levels over the coming months.”