Britain’s biggest building society is temporarily pulling its mortgage offering for low-deposit borrowers such as first-time buyers.
Nationwide Building Society said that from Tuesday, all fixed-rate and tracker mortgages above 75% loan-to-value (LTV) will be withdrawn from sale, either online or through brokers, for remortgaging, first-time buyers and new house purchases.
It said it will focus on supporting existing members and processing ongoing applications, as the coronavirus outbreak continues to have an impact.
Nationwide said it has had an “extremely high” number of inquiries about existing mortgages and ongoing applications.
Up until now, the society has been offering loans to people with deposits as low as 5%.
The move comes after some other mortgage lenders restricted the products on offer last week.
Housing transactions are expected to grind to a near-halt in coming weeks, with lenders agreeing last week to give mortgage offer extensions to those who had been on the brink of moving.
Borrowers with smaller deposits are generally seen as more risky for lenders, as when house prices fall some may end up in negative equity – meaning the size of their loan is bigger than the value of their property.
However, market experts have said that while sales are expected to plummet over the next few months, prices should hold up.
Record low interest rates keeping borrowing costs relatively low and forbearance from lenders should limit the number of “forced” sales – where people desperate to sell may be tempted to slash their asking price.
Bank of England figures released on Monday showed that the number of mortgage approvals made to home buyers reached a six-year high in February – just before coronavirus slammed the brakes on the housing market.
Nationwide said its decision does not have an impact on existing applications. Existing customers moving home, taking further borrowing or switching product will not be affected.
The temporary withdrawal of products above 75% LTV also applies to the society’s buy-to-let arm, The Mortgage Works.
The society said that while face-to-face meetings are not taking place due to coronavirus, applications and appointments can still be held over telephone and Nationwide Now – the society’s high-definition video service in branch.
Sara Bennison, who is responsible for Nationwide’s products and propositions, said: “As the UK’s second largest mortgage lender, and as a member-owned organisation, we need to maintain the levels of service expected of us in the face of an extremely high number of inquiries about existing mortgages and ongoing applications.
“That is why we have taken this decision on a temporary basis although, by continuing to offer home loans up to 75% loan-to-value, we can continue supporting the housing market.
“We continue to monitor for any updates to Government advice and, in this ever-evolving situation, we ask members and brokers to bear with us and thank them for their patience.”