Nationwide boost for first-time buyers

By DAILY MAIL REPORTER
Updated: 05:26 EST, 4 May 2011

First-time buyers who save with Britain's biggest building society will be able to get a preferential interest rate on a mortgage with just a 5% deposit.

Save to Buy: The deal is aimed at potential first-time buyers

Nationwide's Save to Buy deal is aimed at potential first-time buyers prepared to save at least £50 a month for six months.

They can then qualify for a mortgage rate of 6.29% with a £495 fee — the cheapest around for those with a 5% deposit.

Repayments on a typical £150,000 loan would be £993 a month, giving a total cost over the fixed period of three years of £36,243.

The next best deal is from Nottingham BS, which has a three-year fixed rate at 6.39% with a £195 fee. Repayments would be £1,003 and total cost £36,303.

With Nationwide, you have to save into its account for at least six months. It currently pays 2% after basic-rate tax (2.5% before).

If you save more than £2,500, you get £250 cashback, £500 if you save more than £5,000, and £1,000 if you save more than £10,000 — bringing the cost down further still.

There are better savings rates around — for example, Santander's Flexible Isa at 3.3%.

But someone who paid in £250 a month for a year would earn only £21 more interest a year in the Isa than in the Nationwide account.

This, combined with the cashback from taking the mortgage, leaves the Nationwide deal well ahead.

However, there is no guarantee that Nationwide will have the best 95% deal for ever.

Buyers are not limited to its mortgages, but they will miss out on the cashback if they don't take it.