Desperate to get on to the housing ladder but just don’t have the funds for the initial deposit? Nationwide Building Society could have the answer.
From Friday the financial giant is offering customers the chance to apply for a mortgage with just a 5% deposit. The building society’s new Save to Buy regular savings account pays 2.5% gross interest on balances up to £20,000 and after 6 months of saving at least £50 a month, allows customers to apply for one of its 95% loan-to-value ratio mortgages.
It’s the first time the Nationwide has opened the offer up to new customers – previously the mortage option was only available to existing Nationwide customers – and the building society hope it will provide a much needed boost to the static UK housing market.
The building society joins a growing number of lenders, including Yorkshire Bank and the Skipton building society, who are prepared to offer 95% mortgages in return for a 5% deposit. Nationwide says its 95% loan to value mortgage is different to other offers because it doesn’t require parents to act as guarantors of the loan or ask customers to pay into a savings account which can be offset against the loan if payments are missed.
In addition to benefitting from a low initial deposit, the building society says the new 95% mortgage also has a number of cash benefits.
London and Country‘s David Hollingworth was quick to praise the latest mortgage option from Nationwide but did urge customers to read the small print before taking up an account.
“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. 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.”