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Major lenders return to low-deposit mortgages

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Some major UK lenders have returned to selling mortgages to homebuyers only able to offer a small deposit.

Building society Nationwide, and bank Santander have just launched mortgage products at 95% loan-to-value.

That would require a borrower to come up with a deposit of 5% - about £13,850 for a typical home.

Most mortgages of this kind had needed the support of government through the Help the Buy scheme, but now some lenders are going it alone.

'Healthy market'

This is the first time the Nationwide has offered a 5% deposit mortgage of this kind to all customers since 2008. Borrowers will have to pay 3.99% interest and a fee of £999 for a two-year fixed-rate deal.

"Nationwide's move significantly increases the society's lending in the first time buyer market and widens consumer choice," said Henry Jordan, Nationwide's head of mortgages.

Santander pointed to the fact that part of the government's Help to Buy scheme was due to end in 2016, but the lender was "ready to extend our commitment to lending up to 95% loan-to-value without the need for government support".

"There is now a healthy market for customers with smaller deposits," said Miguel Sard, Santander's managing director of mortgages.

Mortgage broker Aaron Strutt, of Trinity Financial, said: "It is great to see more lenders offering straightforward 5% deposit mortgages and specifically targeting first-time buyers.

"We have been waiting a long time for the biggest banks to return to this market."

In a blow to some existing mortgage holders, he said some lenders had raised the interest rates on some of their mortgages.

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