Fifteen per cent deposits for first-time home buyers

● Nationwide targeting new customers ● 85% limit will hit first-time buyers hard

First-time buyers will have to stump up a 15 per cent deposit to get a mortgage through Britain’s biggest building society to purchase their new home.

Nationwide Building Society described the move to place a ceiling of 85 per cent loan-to-value (LTV) on mortgage lending to new customers starting from today as “prudent”.

The minimum threshold will also apply to re-mortgages.

First-time buyers had previously been able to borrow up to 95 per cent LTV from the society, depending on how they applied.

Britain’s biggest building society is placing a ceiling of 85 per cent loan-to-value (LTV) on mortgage lending to new customers – in a move that it said will help protect borrowers from potentially slipping into negative equity.

The step from Nationwide Building Society, which it described as “prudent”, applies to house purchase loans as well as re-mortgages.

It may come as a particular blow to first-time buyers, who often have only small amounts saved to get on to the property ladder and who have become used to a wide availability of low deposit deals in recent years.

This group could previously borrow up to 95 per cent LTV from the Society, depending on how they applied.

However, existing mortgage customers will still be able to obtain loans at up to 95 per cent LTV from Nationwide.

Nationwide said the change, which is due to “these unprecedented times and an uncertain mortgage market”, will happen from today.

Customers who already have a mortgage with Nationwide will be able to switch to a new mortgage deal regardless of their LTV – providing there is no increase in the loan-tovalue.

Applications from existing mortgage customers moving home that are above 85 per cent LTV will also be considered on a “like-for-like” LTV basis, Nationwide said.

The Society said that as a responsible lender, it needs to ensure borrowers can afford mortgage payments and are, as much as possible, protected against the potential for negative equity, should house prices decrease.

Negative equity happens when someone owes more on their home than its value.

Recent house price reports have painted a mixed picture of the housing market, with some suggesting that buyer demand has jumped in parts of England as its housing market reopened.

Some surveys have also suggested that house hunters are considering moves away from cities and to properties where they can work more from home.

Nationwide’s own house price index found that UK house prices fell by more than £4,000 in May. But another index, from Halifax, suggested a less severe price decrease in May of £506 on average. The Office for National Statistics (ONS) has temporarily paused its house price index.

Henry Jordan, director of mortgages at Nationwide Building Society, said: “The outlook for the mortgage market and house prices remains uncertain. As a responsible lender we must factor this uncertainty into our lending assessments, which is why we have taken the decision to reduce our maximum LTV.”