Nationwide slashes mortgage rates for first time buyers
Nationwide has cut its rates mortgage for first time buyers, slashing up to 0.4% off its interest rates for people buying with a 5% deposit.
Rates for the 2 year 95 per cent loan to value (LTV) product are down 0.35% to 3.89% with a £999 fee or 4.29% with no fee.
Someone borrowing £190,000 with a £100,000 deposit would pay £1,034 a month with no fee, or £991 with the fee. Over the first two years, the fee carrying deal works out £33 cheaper, assuming the cost is paid up front.
Rates on longer fixed rate deals have also been cut, with three year 95% LTV fixed rates have been reduced by 0.40% to 4.39% with a £999 fee and 4.69% with no fee, while 5 year fixed rates are reduced by 0.30% to 4.69% with a £999 fee and 4.89% with no fee, respectively.
All these deals qualify for Nationwide’s £500 cashback offer for anyone arranging a first-time-buyer mortgage.
Henry Jordan, Nationwide’s head of mortgages, said: “As part of Nationwide’s range of measures to help first-time buyers on to the housing ladder, we are reducing rates for those with smaller deposits looking for competitive mortgage deals and payment security over a range of terms.”
According to the Bank of England, mortgage rates for first time buyers with a smaller deposit fell by 1.14% over the year to November to 4.13%. That takes £124 a month off monthly repayments, for someone buying a £200,000 property over 25 years.
While this rate cut is good news for anyone taking a mortgage with Nationwide, it’s not the best deal if you’re looking to get a fixed-rate 95% LTV mortgage.
Newcastle Building Society offers a 95% LTV two-year fixed rate deal for just 3.19%, and it has no fee. A £200,000 property would have a £920 monthly repayment, or £114 less than Nationwide.
Loan to value
The LTV shows how much of a property is being financed and is also a way to tell how much equity you have in a property. The higher the LTV ratio the greater the risk for the lender, so borrowers with small deposits or not much equity in the property will be charged higher interest rates than borrowers with large deposits. The LTV ratio is calculated by dividing the loan value by the property value and then multiplying by 100. For example, a £140,000 loan on a £200,000 property is a LTV of 70%.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.