When the Nationwide building society announced plans to bring back a 90% mortgage for first-time buyers many experts gasped. Surely we were not already headed towards the reckless years of 100% mortgages, negative equity and downward pressure on the property market. Fast forward just a few days and things are becoming a little clearer with this so-called “reckless” move by the Nationwide.
First-time buyers
It is true that Nationwide has increased its best offer for first-time buyers from an 85% LTV ratio up to a 90% LTV ratio. As a consequence, first-time buyers in the UK will only need to put down a 10% deposit for their first big investment. This, together with the recent changes in the stamp duty bands, will no doubt have a positive impact on the UK property market and prompt others to follow suit. However, there are some restrictions!
Restrictions on Nationwide 90% mortgage
Thankfully, Nationwide has reinstated its reputation as a cautious but optimistic lender in the UK mortgage market. A company well aware of the risk/reward ratio and understands the market more than most. The restrictions on the new 90% mortgage are as follows:-
• Not applicable for flats or new builds (must be at least two years old)
• Furloughed applicants will be rejected
• Maximum mortgage term is 25 years
It was also announced that applicants will be subjected to an “enhanced” affordability check which will take a closer look at their credit scores. Interestingly, while historically we have seen a cap on the number of first-time mortgage loans there are no such restrictions this time round. At a time when the UK property market is rather more robust than many had expected it seems that mortgage lenders are ready to take up the slack and assist first-time buyers.
Nationwide also launches fixed and tracker rate mortgages
It seems as though Nationwide has been revamping its offerings to homeowners as it also announced a range of fixed and tracker mortgage rates with varied terms:-
• Two year fixed rates, 2.49% with a £999 fee or 2.74% with no fee
• Three year fixed rate, 2.79% with a £999 fee or 2.99% with no fee
• Five year fixed rate, 2.79% with a £999 fee or 2.99% with no fee
• Two year tracker rate, 2.59% with a £999 fee or 2.84% with no fee
We often forget that UK base rates have fallen to their historic lows as a consequence of not only the coronavirus pandemic but the U.S.-led mortgage crash of 2008/9. It would appear that economies will require low-cost debt as an element of long-term recovery hopes and therefore UK base rates may remain relatively low for some time to come. So, is it time to remortgage?
The simple fact is that while it does look as though UK base rates are set to remain relatively low for some time to come, nobody can tell the future. The only rates we can be certain of are the ones in front of us today. So, if you are considering a remortgage or indeed you are a first-time buyer it may be time to take financial advice.