Nationwide Building Society is reducing its maximum loan-to-value to 85 per cent for all but existing borrowers, highlighting the risk of negative equity.
Prior to the change which comes into force on Thursday, the lender capped LTVs at 85 per cent for intermediaries and for direct online applications, but allowed up to 95 per cent for direct customers applying direct over the telephone and through branches.
Under the new restrictions, it will only lend up to 95 per cent LTV to existing borrowers who are looking for a product transfer with no increase to LTV.
Applications from existing customers who are moving home and require an LTV over 85 per cent will be considered if they are also on a like-for-like basis with no additional borrowing.
For first-time buyers and all house purchase and remortgage applicants, lending will now be capped at 85 per cent LTV across all channels.
The building society says: “As a responsible lender, Nationwide needs to ensure borrowers can afford mortgage payments and are, as much as possible, protected against the potential for negative equity, should house prices decrease.”
The lender says it has taken a “prudent” decision in “unprecedented times”.
Nationwide is also reducing rates by up to 10 basis points on 60 per cent LTV deals.
Two-year fixed rates will now start from 1.09 per cent with a £1,499 fee and five-year fixed rates from 1.4 per cent with a £999 fee.
Director of mortgages Henry Jordan says: “The outlook for the mortgage market and house prices remains uncertain.
“As a responsible lender we must factor this uncertainty into our lending assessments, which is why we have taken the decision to reduce our maximum LTV for new business.
“Our priority at this time must be to help members keep their homes.
“As such, we need to ensure our members can afford their repayments, while doing what we can to protect them from falling into negative equity.
“We will continue to keep this situation under review and hope to return to lending at higher LTVs in the near future.”
