Nationwide Building Society will lower the minimum deposit it requires from first-time buyers to 10% from July 20.
It follows the Government’s announcement last week that people getting on or moving up the housing ladder will pay no stamp duty on the first £500,000 of their purchase when they move home.
The stamp duty holiday, which applies to England and Northern Ireland, will last until March 31 2021.
Back in June, Nationwide placed a ceiling of 85% loan-to-value (LTV) on mortgage lending to new customers in a move it described as “prudent” – meaning they would need a deposit of at least 15%.
But amid signs that housing market activity is increasing, Britain’s biggest building society said its new 90% LTV mortgages for first-time buyers will provide further support.
It said there will be no set limit on the number of home loans available.
There are some conditions alongside the new low deposit loans though.
The property must be a house, which is at least two years old.
The maximum mortgage term is 25 years and applicants will be subject to enhanced credit scoring criteria, to make sure the loan is affordable.
Nationwide’s own figures suggest nearly four in five first-time buyers purchase a house or a bungalow, rather than a flat.
The society continues to offer mortgages on new-build homes through the Help to Buy scheme.
Nationwide said it hopes the Government’s temporary stamp duty cut will inject more energy into the housing market ahead of the holiday season, with first-time buyers now able to save up to £10,000 when moving into their first home.
The society said this support, combined with a more active housing market following the easing of the coronavirus lockdown, has helped it to return to higher LTV lending.
The society’s 90% LTV mortgages for first-time buyers will be available direct from Nationwide via telephone, in branch and online as well as via brokers.
Henry Jordan, director of mortgages at Nationwide Building Society, said: “First-time buyers are vital to breathing life into the housing market and economy.
“We understand one of the biggest barriers to home ownership is raising a deposit.”
He added: “While we will continue to monitor the market carefully, we feel it is the right time to enhance our lending, initially to those looking for their first home.
“We welcome the Government’s announcement on stamp duty and hope our combined changes create a positive impact on a market that, despite being in relatively good health, is still recovering.”
According to analysis from financial information website Moneyfacts.co.uk, there were 82 fewer mortgages on the market generally at the start of July compared with the start of June.
The choice of low deposit mortgages has been particularly badly hit during the coronavirus crisis.
Back in March, there were 779 mortgage deals for borrowers with a 10% deposit – but by the start of July there were just 70 products available.
Eleanor Williams, a finance expert at Moneyfacts, said: “For the stamp duty holiday to succeed in encouraging more prospective borrowers to take that next step on the property ladder, the demand for products, especially in the high LTV tiers where most of the fluctuations in availability are focused, needs to be met.”
Before the coronavirus crisis, first-time buyers had been able to get a mortgage from Nationwide with a deposit as low as 5%.
Nationwide said it will continue to review the market and its products to ensure it is lending responsibly while helping first-time buyers.
Its existing mortgage members moving home will be able to continue borrowing up to 95% LTV, while for further advances, the maximum has increased to 90% LTV.
Miles Shipside, commercial director at Rightmove, said: “There’s been record demand for property on Rightmove since the market reopened which has been boosted even further by the stamp duty announcement, all of which should help activity levels over the coming months.”