Nationwide increases borrowing limit for first-time buyers

Nationwide increases borrowing limit for first-time buyers
Credit: Chris Ratcliffe/Bloomberg

Nationwide is launching a ‘Helping Hand’ mortgage next week (April 26) to give first-time buyers the option of borrowing a higher loan amount.

First-time buyers will be able to borrow up to 5.5 times their income when they take a five- or 10-year fixed rate mortgage up to 90 per cent LTV.

According to Nationwide’s lending criteria, maximum borrowing is currently based on a maximum of 4.75 times gross income.

The building society will also apply a lower stress rate in addition to the higher maximum loan-to-income (LTI) ratio, enhancing affordability by up to 20 per cent.

Chris Sykes, associate director and mortgage consultant at Private Finance, said: “5.5 times income is usually reserved for newly qualified professionals such as accountants, barristers, lawyers and engineers, or those earning £100,000-plus and borrowing at lower loan-to-values, but this is a great offering available to all first-time buyers with much lower income thresholds.”

According to the lender, a first-time buyer couple with a 10 per cent deposit and joint income of £50,000 could borrow up to £275,000 with Helping Hand, compared to £225,000 previously, assuming no other costs are impacting affordability.

The society is making £1bn of lending available via ‘Helping Hand’.

Henry Jordan, director of mortgages at Nationwide Building Society, said: “[With] household incomes rising at a slower rate than house prices, many first-time buyers are finding it increasingly hard to get onto the property ladder.

“Our new Helping Hand option supports borrowers in meeting the affordability requirements, making it easier for them to buy a home of their own.”

The building society described the increase in the maximum LTI as a move to help generation rent become generation buy.

It comes after the government’s mortgage guarantee scheme launched this week (April 19) to support potential buyers with a 5 per cent deposit to join the housing ladder.

David Hollingworth, associate director, communications at L&C Mortgages, said: “Although first-time buyers will have been buoyed by the launch of the government guarantee scheme and the consequent improvement in product options for those with as little as 5 per cent to put down, those deals won’t offer a solution for all.

“The other big challenge for first-time buyers in particular is to be able to borrow enough to meet the high purchase prices in the current market.

“Nationwide’s approach to offer more flexibility to those fixing in and removing any concern over fluctuating interest rates for at least five years makes a lot of sense and should open up another opportunity for those that may so far have found their borrowing options limited.”

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