Deal of the week - Nationwide 95 per cent mortgage

What’s the deal?

Nationwide Building Society has launched a regular savings account that gives first-time buyers access to mortgages with just a 5 per cent deposit.

Save to Buy offers a rate of 2.5 per cent on balances up to £20,000 and customers must save at least £50 a month.

On top of this, Nationwide will give cashback rewards of up to £1,000 if customers take out a 95 per cent
loan-to-value mortgage with the lender.

Is it good?

The rate of interest earned on the savings and the cashback element compare favourably with similar deals offered by rival lenders, according to Melanie Bien of Private Finance, the mortgage broker.

Those saving between £2,500 and £4,999 will receive cash of £250, while those saving £5,000-£9,999 will receive £500. Those with savings of more than £10,000 will receive £1,000 if they take out a mortgage.

The deal will also appeal to housebuyers with small deposits. Nationwide previously only offered 95 per cent loans to existing customers moving home.

What’s the catch?

First-time buyers have to be saving into Save to Buy for six months before they are eligible for one of Nationwide’s 95 per cent mortgages.

Opening a Save to Buy savings account does not guarantee acceptance for a mortgage. A spokesman for Nationwide said all mortgages will still be subject to eligibility, underwriting
and other criteria – and these are likely to remain tough.

Nationwide’s mortgage rates are also not the cheapest on the market. It has a five-year fix for 6.89 per cent, while Nottingham Building Society offers a rate of 6.39 per cent on its five-year deal.

What’s the alternative?

Other lenders including Nottingham Building Society, Cumberland Building Society and Yorkshire and Clydesdale Bank also offer mortgage-linked savings products.

Skipton Building Society also offers normal mortgages at 95 per cent loan-to-value.

How do I find out more?

www.nationwide.co.uk or visit one of Nationwide’s branches