Nationwide doubles the deposit required for new mortgages

By Kate Hughes

Nationwide has defied the Government's latest efforts to ease the mortgage market squeeze by announcing plans to dramatic-ally tighten its lending criteria for new customers.
The building society has said that borrowers will need to double their minimum deposit to 10 per cent to be considered for most of its mortgage products from 1 May, ignoring the Government's attempt to lift mortgage and financial market tension with a £50bn injection last week.

Applicants will be considered for loans only if the funding is for 90 per cent or less of the property value on all but two of Nat-ionwide's products, and the lender has slashed its maximum loan amount from £1m to £500,000 for all new customers – precisely the type of move the Special Liquidity Scheme (SLS) rescue package had aimed to prevent. From next month, only borrowers on Nationwide's three-year fixed or tracker deals will be considered with a minimum deposit of 5 per cent.

"The mortgage market will not transform overnight and we need to be able to manage our business in a prudent way while the SLS takes effect," Zoe Stevens, a spokeswoman for Nationwide, said. "These changes will allow us to maintain control of the volume of business the Society is attracting, while enabling us to continue offering our full range of mortgages to our existing members in a controlled way."

Elsewhere, Abbey will permit interest-only loans only up to a value of 50 per cent from tomorrow, unless the customer has a linked repayment vehicle such as an ISA. And for all borrowers of more than 90 per cent loan to value, the bank will require one month's bank statements from each customer in addition to standard credit checks.

Many had hoped that the SLS would cause a drop in Libor – the rate at which banks lend to each other – with a knock-on effect of easing rates and conditions for customers. But the Government's desperate move appears to have failed and borrowers are now being warned that the biggest struggle is being able to get a mortgage rather than being able to afford one.

Sean Gardner of the comparison site Moneyexpert.com, said: "Availability is the biggest hurdle despite all the Government efforts to get lenders lending. If you don't have a substantial deposit or equity in your house then your choices are now severely limited. When disposable income is already at breaking point for many, it is frankly impossible to see how those with limited savings will find a way to get a foothold on the property ladder."

Jeremy Leaf of the Royal Institution of Chartered Surveyors (Rics), said: "Sentiment is at a very low ebb and will continue to remain depressed while the economy suffers from this unique liquidity blight. The slowdown in prices is directly attributable to a lack of available finance which has hit demand."

Source: http://www.independent.co.uk