Nationwide triples minimum deposit for UK first-time buyers

Mortgage lender sets 15% level to help protect customers from negative equity

Source: https://i.guim.co.uk/img/media/16b2a7addd19922c30621bdf4
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One of Britain’s biggest mortgage lenders, Nationwide, is to triple the minimum deposit that first-time buyers must put down as it braces itself for falling house prices and the possible return of negative equity.

Nationwide said from Thursday it will withdraw all its new loan deals where the first-time buyer only puts up a 5% deposit and set a new minimum deposit of 15%.

The rise represents a dramatic increase in the amount that buyers will have to save to buy the average home. According to Nationwide’s house price index, the average UK house price is £218,902 – which means a buyer will have to stump up a minimum deposit of at least £32,835 compared with £10,945 before.

Nationwide said it was making the move to protect new customers from being trapped in negative equity. That happens when a borrower takes out a mortgage with a small deposit, only to find that as house prices fall, the mortgage becomes more than the value of the property.

Henry Jordan, the director of mortgages at Nationwide, said: “As a responsible lender, Nationwide needs to ensure borrowers can afford mortgage payments and are, as much as possible, protected against the potential for negative equity, should house prices decrease … Our priority at this time must be to help members keep their homes.”

Nationwide’s decision to cap its maximum loan-to-value (LTV) at 85% comes only weeks after its data revealed a plunge in house prices across the UK in the wake of the coronavirus pandemic.

It said that in the month to May house prices fell by 1.7%, the biggest monthly fall since February 2009, when Britain was in the grip of the financial crisis.

First-time buyers hoping that other lenders will give them a low-deposit mortgage are likely to be disappointed. Nationwide’s move follows a string of market withdrawals by smaller lenders last week.

The tiny Saffron building society remains one of the few lenders that will still offer a 95% LTV – but the broker Chris Sykes of Private Finance said: “In honesty, I wouldn’t be surprised if these are gone by the end of the week as they will be absolutely inundated with applications.”

The Nationwide announcement will be a major blow to England’s property market just as it has begun to pull out of the Covid-19 lockdown.

A month ago the housing market in England was given the green light to reopen after seven weeks of lockdown. However, property professionals warn that if first-time buyers cannot get mortgages big enough to buy homes, then the property market will stall and prices will fall.

Economists are sharply divided about how far house prices will be affected by the coronavirus. The Centre for Economics and Business Research predicted in May that 2020 prices would be down by 13% “as a lack of transactions, high uncertainty, and falling incomes take their toll”. However, the estate agent Savills said the hit to the market could be more like 7.5% and a third of valuation surveyors are predicting that price falls could be limited to 4% or less.

Nationwide said the 15% minimum deposit would apply to all new house purchase, remortgage and first-time buyer applicants.

Buyers who can put up a 40% deposit will benefit from a small drop in its fixed rates, which will fall by 0.1% to 1.09% on a two-year deal or 1.4% on a five-year fix.

https://www.theguardian.com/business/2020/jun/17/nationwide-triples-minimum-deposit-for-uk-first-time-buyers CMP=share_btn_fb&fbclid=IwAR1Gh85VmF4LKYL4DeeVLiA3OPGH4NY3RNZWXaMhlgAREhV_w3BqmCBdls8

House prices:lockdown leads to sharpest monthly fall in value since financial crisis

BY JONATHAN PRYNN

House prices fell at their fastest rate last month since the depths of the financial crisis more than a decade ago, a survey reveals today.

Source: https://lifestylefrisco.com/wp-content/uploads/2017/
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The average cost of a home in the UK dipped by 1.7 per cent in May, knocking just over £4,000 from its value, according to lender Nationwide.

It was the biggest monthly fall since February 2009 when the market was reeling from the collapse of Wall Street bank Lehman Brothers.

The annual rate of increase has dropped from 3.7 per cent to 1.8 per cent, bringing the revival in the property market since the election in December to a juddering a halt.

The dip covered a month that started in full lockdown, with only a tiny handful of sales being carried out. However agents have reported a surge in activity since the Government allowed the property market to reopen on May 13.

David Westgate, chief executive at agency Andrews Property Group, said: “May was the ultimate month of two halves. No activity at all in the first half and a frantic hive of activity in the second as transactions resumed.

“It will be 2021 before the property market finally gets into its stride again but for now the level of transactions post-lockdown has been staggering.”

Tomer Aboody, director of property lender MT Finance, said: “Banks are eager to lend, with liquidity extremely high. Interest rates are at an all-time low and agents are reporting a positive uptick in applicants registering.”

Guy Gittins, managing director of agency Chestertons, said: “A 1.7 per cent drop in prices in a month is dramatic but not as steep as many had expected and prices still remain nearly two per cent higher than this time last year.”

https://www.homesandproperty.co.uk/property-news/house-prices-fall-monthly-lockdown-a138606.html

Government urged to extend Stamp Duty relief to last-time buyers

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BY MARC SHOFFMAN

A new report suggests the Stamp Duty exemption should be extended to last-time buyers.

Research by the Cass Business School and the Centre for the Study of Financial Innovation, said elderly people should be encouraged to downsize, but warned the lack of age-friendly housing in the UK limits the options for millions who are open to moving but decide to stay.

The report, titled Too Little, Too Late? Housing for an ageing population, found that under-occupation is concentrated among the elderly population – those aged over 65 – where people tend to live in couples or alone.

It claims there are more than 15m surplus bedrooms in the UK, which could rise to 20m by 2040 if no action is taken.

The report recommends a Stamp Duty exemption for ‘last-time’ buyers – similar to the relief offered to first-tine buyers – worth up to £300,000 to encourage older home owners to downsize and free up housing stock.

The Government should promote the benefits of downsizing and incentivise people to do so before social care is needed, according to the report.

It also calls for local authorities and developers to plan for retirement housing.

Professor Les Mayhew, author of the report, said: “If more family homes were freed up by downsizing, the benefits would cascade down the housing ladder because it would enable families to ‘upsize’, allowing more first-time buyers on to the bottom rung.

“More efficient use of the existing stock would reduce pressure to ‘just build more’ as a solution to the UK’s housing shortage.

“The demand is out there as baby boomers seek to redeploy housing equity into smaller, more convenient homes with independent living and easy access to services. This would also reduce pressure on local authority spending through transfer to care homes and allow more efficient delivery of social care to individuals.”

Commenting on the report, Nigel Wilson, chief executive of Legal & General, which is helping fund more retirement housing, said: “Our housing stock needs to work for everybody.

“People of all ages need more supply of housing and better choices.

“We know there is strong demand for the right sort of housing for later life living, with great design, supportive communities and good access to friends, family and facilities.

“Housing policy now needs to catch up with the demands and opportunities of our ageing demographic: getting this right has benefits for everyone.”

Amy Wray, owner and managing director of Yorkshire-based agent Applegate Properties, said: “Whilst many last-time buyers may not actually require a reduction in Stamp Duty to make their move possible – as many have equity in their property – the passing of this exemption alone would raise huge awareness in the UK surrounding the amount of current empty bedrooms. Additionally, it would encourage many home owners to re-think their position once their families have flown the nest.

“Creating an awareness around ‘downsizing to support growing families’, would greatly motivate thousands of potential sellers to make the move sooner, rather than feeling an emotional responsibility to ‘cope’ with their now oversized family home.

“So many home owners have never even considered that they are contributing to the shocking statistic of there being 15m empty bedrooms.

“Therefore, such awareness could make for a huge shift in the mindset of all purchasers, making downsizing earlier the ‘new normal.’

“Good quality, over-55s retirement housing – with 24-hour wardens, maintained gardens, lifts and optional social areas – are hugely popular, so much so that we have a waiting list if any of these homes become available.”

https://propertyindustryeye.com/government-urged-to-extend-stamp-duty-relief-to-last-time-buyers/