Three lenders have returned to offering mortgages on small deposits, giving a boost to first-time buyers who have grappled with a credit crunch in recent weeks.
Nationwide, Coventry Building Society and Co-operative Bank’s Platform will offer loans for those with as little as a 10 per cent deposit.
Nationwide will bring back 90 per cent loan-to-value (LTV) mortgages from Monday, just a month after withdrawing similar products. The UK’s second-largest mortgage lender said its decision was in response to the chancellor’s stamp duty holiday for properties valued up to £500,000.
The return of 90 per cent home loans will raise concern at the Bank of England, which is responsible for financial stability, and the Financial Conduct Authority, which regulates businesses, because of the possibility of negative equity. This is when the value of the loan becomes greater than that of the property.
Henry Jordan, head of mortgages at Nationwide, said: “We understand one of the biggest barriers to homeownership is raising a deposit. While we will continue to monitor the market carefully, we feel it is the right time to enhance our lending, initially to those looking for their first home.”
There will be a two-day window to take out a 90 per cent LTV mortgage with Coventry Building Society. Applications open at 8am today and close at 8pm on Wednesday.
Platform’s 90 per cent LTV mortgages will be available without a fee from tomorrow, although the interest rate must be fixed for five years.
Mark Harris, of SPF Private Clients, a mortgage broker, said: “If other big lenders were to reintroduce high LTV mortgages, this would put pressure on the others to do the same, while ironically easing the pressure on them once they do.”