Nationwide has become the latest lender to cash in on the growing number of buyers looking to get on the property ladder with a modest deposit, launching a range of mortgages for those with just five per cent to put down for the first time since 2008.
The rates "are not market leading", but prospective buyers who go to complete will receive £500 cashback. This would need to be weighed against the higher servicing costs for the loans compared to the average rate for a two-year fix with a five per cent deposit, quoted by Moneyfacts at 3.35 per cent, and the market leading rate from HSBC of 3.79pc with a smaller £99 fee.
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Availability of loans at such low deposits is growing as soaring house prices reduce the effective buying power of savings. Propertywire said in June there were 170 mortgage deals on the market available to those with a five per cent deposit, up from just 31 in 2012. Average rates have also been decreasing – in fact, this was the only class of mortgage to see rates fall over the past month.
Banks are seeking to expand their presence in the market even as the Government's Help to Buy guarantee scheme moves towards its conclusion next year. Nationwide's offering is not part of the scheme – and Santander has said it will cease to offer loans under Help to Buy from the end of this month, offering them independently instead.