Housebuyers need a 25% deposit say Nationwide

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by Kay Murchie

Nationwide, the country’s fourth-biggest mortgage lender, said homebuyers should prepare themselves for a new era of mortgage lending of putting down a huge deposit.

The clampdown by Nationwide comes as banks and building societies tighten their lending criteria following the credit squeeze and it is expected that other lenders will follow suit, according to Ray Boulger of mortgage advisers John Charcol.

Until yesterday, borrowers were required to raise a deposit of 10% or more to take advantage of Nationwide’s best rates. They now need 25% or more or pay an interest rate which is 0.2 percentage points higher.

The increase will only affect new borrowers and wipes out the benefit they would have experienced following the 2 recent interest rate cuts.

This means for those with an average mortgage of £155,000, the new penalty will add almost £250 onto the annual cost of their repayment mortgage.

Housebuyers in the capital will be hit hard, with the average price of a London house now over £300,000, buyers will require a deposit of at least £75,000 up front.

According to the Council of Mortgage Lenders, a typical first-time buyer puts down a 10% deposit when they purchase a property.

A spokesperson for Nationwide said our costs of funding are higher and, like all lenders, we have to adapt to changes in the market place.

The news follows the announcement that property prices have fallen for a fifth consecutive month in February, according to Hometrack.