Nationwide Building Society is the youngest lender to offer 5 percent deposit mortgages and offers the lowest interest rate yet.
It’s the largest bank or building society that brings back a 5 percent product at the lowest available rate, 3.49 percent.
Nationwide also offers a two year fix of 3.69 percent with a fee of £ 999 and 3.84 percent with no fee.
Nationwide has launched a five percent deposit mortgage with a market leading rate
For a five year term, a rate of 3.79 percent is offered with a fee of £ 1,499, 3.89 percent with a fee of £ 999, and 3.99 percent with no fee. The mortgages will start on Thursday.
As with all Nationwide mortgages, first-time buyers receive £ 500 cashback upon completion.
The mortgages are available to both first-time buyers and moving companies, but they have some additional restrictions.
Self-employed borrowers are not eligible for loans and are only available to buyers who are buying a home, not an apartment. New buildings are also excluded.
The 3.49 percent headline rate beats the currently lowest 3.61 percent rate available with Platform, although the statewide fee is £ 1,499 and the Platform product is £ 1,249.
For a buyer buying a £ 200,000 home, the monthly payments for both would be roughly comparable to Nationwide’s for £ 950 and the platform for £ 962.
A zero-fee deal with a higher interest rate could offer better value depending on the value of your property.
The This is Money mortgage calculator allows you to compare rates and fees and find the best deal.
More choice for first-time buyers
Lenders have returned to the low-deposit mortgage market in recent weeks after a cull at the start of the pandemic.
This is partly because the government promised to get five percent of its contracts under a new guarantee system, but Nationwide’s new mortgages were taken out independently of that system.
Earlier this year, the lender took out a new 90 percent mortgage, giving first-time buyers the option to borrow 5.5 times their income instead of the usual 4.5 times.
Henry Jordan, Director of Mortgages at Nationwide, said, “Deposits and affordability are two of the main problems first-time buyers face today, making it harder than ever to find their first home.
‘As the UK’s largest building society and second largest lender, helping people in their first home is at the heart of everything we do.
‘As a leading first-time buyer lender, we are confident that we can get back into the 95 percent LTV market without the mortgage guarantee system.
“By not being part of the program, we can add value to our members. This is demonstrated by the market-leading prices we are announcing today.”
Borrowers with 5 percent deposits now have more than 100 mortgages to choose from as the mortgage market rebounds.
At the beginning of May, 112 different 95 percent mortgages were on the market, more than three times as many as in the previous month, according to an analysis by Moneyfacts.
Lloyds, Santander, Barclays, HSBC and NatWest are offering the loans, while Virgin Money will be offering them starting this month.
However, brokers caution that those who benefit will need good credit, and many of the mortgages are not available to new buyers.
Base Rate Tracking Option – But Does It Make Sense?
Should I take a tracker plan?
Tracker rates are essentially a game of luck. What looks like a bargain now could soon become very expensive if and when interest rates rise.
Anyone considering a tracker needs to make sure that it doesn’t just save one problem for the future.
If the tracker comes with an early repayment penalty that would make jumping ships expensive, make sure your finances can drive interest rates to rise by at least 2 to 3 percent.
That’s why at This is Money we offer similar tracker deals that fit into one of these three categories: no early repayment penalties, a cap on the level of the interest rate, or the ability to jump to a fixed rate when interest rates rise.
In addition to fixed rates for two and five years, Nationwide offers a tracker plan – one of only two lenders who do this with Santander.
A tracker rate is tied to a percentage above the Bank of England base rate, which means that when the base rate does so, borrowers’ monthly payments increase.
Borrowers who take out a tracker mortgage usually do so because they believe the base rate will fall or stay the same.
The key rate is currently at an all-time low and is unlikely to fall any further, although some predict it could stay at 0.1 percent for a few years.
It is much more likely to rise than fall, however, so it could be a risky venture to pursue.
The other reason borrowers typically take out a tracker mortgage is for flexibility, as these businesses often don’t have the same early repayment penalties as fixed products if they want to overpay or leave the mortgage before the end of the initial trading period .
This is generally more of an issue for those higher up the home ladder who may decide to overpay, for example to settle their mortgage faster.
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