People buying homes in London have been told by Nationwide – Britain’s building society – that they will need to pay a deposit of at least £75,000 to avoid higher mortgage costs. The building society has moved to increase deposits to get its best rates from 10% to 25%.
As London house prices now average over £300,000, it means that buyers will have to find £75,000 for the deposit. Anyone hoping to buy their first home in the capital will find this a major blow.
What a turn around from last week when several 125% mortgages were still available on the market – i.e. no deposit and extra cash with your mortgage – to a 25% deposit required.
The credit crunch continues to widen its impact, and high loan-to-value mortgages are disappearing. At the same the number of mortgage defaulters is on the increase.
Nationwide used to offer its best rates to people who could find a 10% deposit. Now, unless you can find 25% for a deposit, you will face an extra 0.2% on the interest rate.
The change only affects new borrowers, but effectively negates any benefit they would have seen from the recent cut in interest rates by the Bank of England.
A spokesman for Nationwide said: “Our costs of funding are higher and, like all lenders, we have to adapt to changes in the market place.â€
Competitors in the market place are likely to follow suit as no-one seems particularly interested in market share at the moment. Instead, they are pursuing bigger margins to boost their cash reserves and profits. Tracker rates have crept up so that the closest to the bank’s rate is now 0.5% higher, whereas six months they were only just above base.
Lenders are adopting a much more cautious approach to lending now, since the credit crunch started to take hold.
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