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Nationwide has become the first high street brand to restart mortgage lending to first-time buyers with a 10pc deposit, following the Government’s move to boost activity in the housing market.
Britain’s biggest building society restricted its mortgages in June, citing fears that falling house prices could leave high-mortgage borrowers in negative equity. Since then, only customers with 15pc deposit have been able to apply for loans with many potential first-time buyers locked out the market.
However, Nationwide said the stamp duty tax break introduced last week by Chancellor Rishi Sunak had helped restore confidence in the country’s struggling property sector.
Although most first-time buyers already paid reduced or no stamp duty, Nationwide said the move would boost confidence in the wider market. This will allow it to resume lending first-time buyers with a 10pc deposit from Monday July 20.
Last week, Telegraph Money called on banks to support first-time buyers after the stamp duty cut left them facing greater competition for homes but with little-to-no access to lending.
Nationwide was one of the many banks and building societies to withdraw 5pc and 10pc deposit mortgages in recent months. HSBC has been the only major brand to offer 90pc mortgages throughout the pandemic, although only limited numbers of loans have been available.
Nationwide said it would have no limit on its lending but that it would continue to monitor market changes.
Following Nationwide’s announcement, Coventry Building Society announced it would offer 90pc mortgages on a trial basis on Tuesday July 14 and Wednesday July 15. Platform, part of the Co-operative Bank, will also offer 90pc loans from Wednesday.
Chris Sykes of Private Finance, a mortgage broker, hoped others would follow suit. He said: “With Nationwide being one of the largest lenders for first-time buyers, this is likely to encourage others back into the market.”
Mr Sykes said that some banks had been reluctant to offer small-deposit loans because of fears they would be overwhelmed with applications. The return of Nationwide, the country’s second largest mortgage lender, should ease these concerns, he said.
Mark Harris of SPF Private Clients, another mortgage broker, said that Nationwide had toughened its mortgage rules ahead of its relaunch.
Its range of 90pc loans would be available with a maximum mortgage term of 25 years, meaning customers cannot borrow excessive sums by spreading the cost over many decades.
However, the bank has said it would not lend to those buying flats or new-build houses. These are typically perceived as most vulnerable to sudden price falls if economic conditions worsen.
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