The Minimum Deposit Increases
Mortgage lender Nationwide has confirmed that it will be withdrawing all new loan deals for five per cent deposits for first-time buyers (FTBs) and setting a new minimum of 15 per cent.
The group said the decision had been taken in order to protect new customers from finding themselves in negative equity in the future, the Guardian reports. This can happen if a mortgage is taken out with a small deposit but, as house prices fall, the mortgage then becomes more than the value of the property.
For FTBs, this means that they will have to save a lot more in order to buy the average home. Nationwide’s own price index shows that the average house price in the UK is now £218,902, so someone would have to have a minimum deposit of at least £32,835 – compared to £10,945.
Data also shows that in the four weeks leading up to May, house prices dropped by 1.7 per cent – the biggest monthly fall seen since February 2009, which was mid-recession.
“As a responsible lender, Nationwide needs to ensure borrowers can afford mortgage payments and are, as much as possible, protected against the potential for negative equity, should house prices decrease … Our priority at this time must be to help members keep their homes,” director of mortgages Henry Jordan was quoted by the news source as saying.
The latest report from Rightmove, released today (June 18th), shows however that the release of pent-up demand when England’s housing market reopened on May 13th led to record levels of buyers enquiring about moving elsewhere.
Some of the strongest markets were found to be in the north, with people showing strong interest in Wigan, Rochdale and Bolton, although Hereford came top of the list.