Nationwide changes mortgage rules to let first-time buyers buy new builds with just a 5% deposit
Nationwide Building Society is offering first-time buyers the chance to get a mortgage covering up to 95 per cent of the purchase price when buying new build houses.
The mutual says the mortgage product will be available from Thursday and will also enable buyers to borrow up to six times' their annual income, when they do so via its Helping Hand scheme.
Many banks and building societies ask for a minimum deposit of 10 per cent or more when buying a new build, as the properties can fall in value in the first few years.
Nationwide's change means a first-time buyer couple earning a combined £80,000 combined might be able to borrow up to £480,000 to put towards a new-build house, as long as they have a 5 per cent deposit and can afford the monthly repayments.
Nationwide is also increasing the maximum loan-to-value cap on new build flats. From Thursday first-time buyers will be able to buy a new build flat with a 15 per cent deposit as opposed to 20 per cent previously.
Mortgage offers on all new builds will also be extended to nine months, to take account of the fact there can be construction delays.
The longer offer period lowers the risk of needing to reapply for a mortgage in the event the property takes longer to complete.
Nationwide says its Helping Hand mortgage products have supported more than 57,000 customers since its launch in 2021, with more than 26,000 customers using Helping Hand between April 2024 and March 2025.
New build sales have suffered since the end of the former Government's Help to Buy scheme, which was only available on new builds.
Mortgaged new build sales in 2024 were around a third lower than in the last full year of the Help to Buy scheme in 2022.
Nationwide says tough deposit requirements and affordability challenges have also played a major part in this, but claims its latest change could help 10,000 more first-time buyers onto the ladder.
Why does a new build require a bigger deposit?
New build houses have historically been seen as riskier properties by lenders. Just like a new car depreciates in value, new builds have sometimes had a tendency to fall in value during the first few years of ownership.
'Historically, new builds have carried more risk for lenders, especially flats, because of the initial over-valuation risk,' says Ravesh Patel, director and senior mortgage consultant at broker Reside Mortgages.
'There was perceived to be a risk that the property could depreciate following completion, often with developers' incentives distorting values in the first instance.'
Aaron Strutt of mortgage broker Trinity Financial, added: 'A new build first-time buyer 5 per cent deposit mortgage at six times salary is pretty punchy,' said Strutt.
'Many of the other lenders would not be comfortable offering a product like this. But from a borrower perspective, it gives many people the chance to get on the property ladder and buy a new home.'
Nationwide is not alone in offering 95 per cent mortgages on new build houses. Accord, Barclays, Halifax and Skipton are among the other lenders that offer them.
The Labour Government's 1.5million homes target could also encourage more lenders to change their rules on new-build mortgages.
'There's a political and regulatory encouragement for lenders to support first-time buyers, particularly with the ongoing housing shortage,' says Patel.
'After volatility in 2022-23, the property market has also stabilised in many areas. Lenders now feel more confident about long-term property values.'
Perhaps not surprisingly housebuilders have welcomed Nationwide's announcement.
Ceri Pearce, sales and marketing director at Taylor Wimpey said: 'The increase in the maximum loan to value on new build houses to 95 per cent will make it easier for buyers to secure a mortgage with a smaller deposit, and the extension of mortgage offers to nine months will give borrowers greater certainty and flexibility during the construction process.
'These changes reflect a strong commitment to supporting the housing market and responding to the underlying demand for new homes.'
Adrian MacDiarmid, of Barratt Redrow, added: 'Improving affordability and access to home ownership helps underpin housebuilders' confidence to invest in order to deliver the homes that this country needs.
'We look forward to continuing to work with Nationwide Building Society to support our mutual customers.'
Best mortgage rates and how to find them
Mortgage rates have risen substantially over recent years, meaning that those remortgaging or buying a home face higher costs.
That makes it even more important to search out the best possible rate for you and get good mortgage advice, whether you are a first-time buyer, home owner or buy-to-let landlord.
Quick mortgage finder links with This is Money's partner L&C
> Mortgage rates calculator
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To help our readers find the best mortgage, This is Money has partnered with the UK's leading fee-free broker L&C.
This is Money and L&C's mortgage calculator can let you compare deals to see which ones suit your home's value and level of deposit.
You can compare fixed rate lengths, from two-year fixes, to five-year fixes and ten-year fixes.
If you're ready to find your next mortgage, why not use This is Money and L&C's online Mortgage Finder. It will search 1,000's of deals from more than 90 different lenders to discover the best deal for you.
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