Nationwide Building Society have announced that from the 9th of June 2023, they will be increasing the Nationwide maximum loan to value for non new build flats and apartments. What does this mean exactly? The loan to value of a property is the percentage of a property that can be mortgaged compared to the full value of the property. In a tough property market and an even tougher mortgage market, this new change is certainly a very interesting move.
Nationwide Maximum Loan To Value Increases
Most mortgage lenders will categorise their products based on loan to value brackets. Higher loan to values are rarer and have higher interest rates because lenders want to encourage people to invest more of their own money in a property purchase, rather than relying more on the bank. This is to remedy the obvious risk factor that comes with lending large amounts of money.
Historically, mortgage products for flats and apartments are usually offered up to a maximum of 85% – 90% loan to value due to the resale ability of flats and other associated lending risks such as cladding and leaseholds. This means that people looking to purchase flats generally need a 10% or 15% deposit. However, the recent change announced to the Nationwide maximum loan to value for flats and apartments will make a huge difference.
Nationwide have announced that they will be allowing 95% mortgage for flats and apartments that are non new build (brand new homes) and increasing their maximum flat remortgage loan to value to 90%. That means that new buyers with smaller deposits can now potentially purchase a flat with as little as 5% deposit. This will come in handy for renters who have been unable to save a large enough deposit recently to purchase their first home, without having to wait as long. To put this in to perspective, let’s look at some figures.
5% Deposit For Flats
In London, where out mortgage brokers are based, the average price of a flat is around £400 – £500K. Some areas of London will have flats being sold between £200K and £300K, but this is just an average of the entire capital. So, if a first time buyer was looking to purchase an average flat, they would have previously needed to save somewhere around £75K at least as a deposit in order to get an 85% to 90% mortgage.
With the new changes to Nationwide maximum loan to value criteria, the same borrower could potentially put down £25,000 and get a 95% mortgage on a £500K non new build flat. As long as they can still afford the 95% mortgage loan of £475,000. Nationwide have clarified that this 95% mortgage product for flats will only be available up to a maximum loan of £500,000. So anyone looking to borrow more than £500,000 with a 5% deposit will not be able to use this product. And although the rates have not been released yet, they will most likely be between 5% and 6% in line with most other lenders rates.
Speak To a Mortgage Advisor About Buying a Flat in London
If you are looking to purchase a flat, please feel free to give our team a call today. We are experts in mortgages and London property and can help you find out exactly what you can borrow and we can get you the best mortgage rate available for your circumstances. Call our team today for free.