Borrowing Still Tough as Deposits Go Up
As Nationwide announced requirements for higher deposits, and reduced borrowing limits, the cheapest tracker rate on the market comes from First Direct.
The move towards responsible lending by mortgage lenders is not going to make it any easier for borrowers to get a mortgage. This is going to make it especially hard for first-time buyers.
Anyone looking to buy with only a small deposit is likely to be squeezed out of the mortgage market as banks and building societies tightened up lending criteria once again.
As well as putting up its minimum deposit for new borrowers, the biggest building society in Britain, Nationwide, has also reduced the amount it is willing to lend.
Its announcement of new mortgage rates this week came with the news that the minimum deposit it will accept is 15%, with the sole exception of its three-year tracker rate which is 1.49% above base rate, making it currently 5.99%.
Nationwide has also reduced its borrowing amounts to 4.1 times single or joint income. Thus, if an individual has an income of £25,000 he or she would be able to borrow £102,500, which is a reduction of around £4,000 on the building society’s previous terms.
At the moment the best tracker rate around is cheaper than the best fixed rate deal. The lifetime tracker from First Direct is 0.49% above base rate – making it 4.99% at the moment – and comes with a fee of £999, and the requirement for a 20% deposit. On an average £150,000 loan initial monthly repayments would be £876 on a 25 year loan.
This comes in at £44 a month cheaper than the best fixed rate deal around, from Market Harborough BS. The rate is 5.49% which makes the repayments on a 25 year £150,000 loan £920.
Taking the tracker deal would mean that you would have a base rate rise of 0.5% “in hand” before the tracker became more expensive than the fixed rate.
