Nationwide Mortgage Offer Trap

by Mark Johnston

We recently reviewed the Nationwide Building Societies Save to Buy Deal which allowed would be first time buyers an opportunity to save money and possibly receive a 95 per cent deposit and other quite good usually not reserved for FTB’s. 

This initiative fits in line with the governments wish to see more first time buyers actually purchasing their first homes.  The Leeds Building Society has pledged to help the mortgage market by targeting an increase in lending by up to 25 per cent during 2011.  Leeds Building Society reported a tidy £42.2 million pre tax profits last year and by increasing their lending to borrowers, we can be sure that their profits will be suitably increased this year too.

With the average Loan to Value (LTV) of just about 53 per cent, new mortgage lending at the Leeds Building Society has risen 7 per cent from £922 million to £984 million.  Ian Ward, Chief executive said: “In 2011, we plan to increase our new lending by at least 25 per cent to around £1.25bn. This will be welcomed by home buyers as we provide more capacity and choice to the UK mortgage market.

“Leeds Building Society has again proven its ability to deliver higher levels of profitability, savings balances and new mortgage lending as well as an increase in members and very strong capital and reserves. This means that we are in an excellent position to increase new lending significantly in 2011 and continue to be a successful, independent building society throughout this year and beyond.”

In addition, five local authorities, including Warrington, Blackpool, Newcastle under Lyme, Northumberland and East Lothian will be piloting the new Helping Hand initiative, which will see first time buyers with only a 5 per cent deposit helped with a top up from their local council.  Lloyds TSB is the first to sign up to the programme.  The councils will put 20 per cent of the price in a Lloyds TSB account, the funds will not go to the buyer and the lender will ask for 5 per cent of this deposit.

But house prices are getting cheaper by the month, according to industry experts, house prices fell by 1.3 per cent from January to April, putting the average house price at £165,600.  House prices fell by 0.2 per cent last month. 

When the unemployment figure and Bank of England base rate figures are revealed soon, industry insiders believe that the average house price will fall even further down and those tempted into first time mortgages may regret their decision in 12 months.

Robert Gardner, chief economist at Nationwide, said “The price of a typical house fell by 0.2pc in April, which left prices 1.3pc lower than the same period of 2010. The three month on three month measure of house prices, a better measure of the underlying trend, showed a modest rise of 0.6pc.

“Since November 2010 house prices have increased in three months and fallen in three months. However, it is not unusual to see a pattern of modest monthly increases and decreases when the market is fairly static, as has been the case since last summer.

“There is still little evidence to suggest that price declines will accelerate in the months ahead. While the UK economy only managed a modest bounce-back at the start of the year, after the weather-induced contraction in late 2010, the economic recovery is expected to gather momentum.”  One positive out of the new deals on offer is the link they now seem to bond between saving money and buying a house.

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