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Nationwide lets first-time buyers borrow 20% MORE – if they lock mortgage rate for five years 

Nationwide lets first-time buyers borrow 20% MORE as it raises mortgage limit to 5.5 times salary – but they must lock in for five years

  •  UK’s second-largest mortgage lender changes loan-to-income calculation – but only for first-time buyers fixing their rate for between five and 10 years
  • They will be able to borrow 5.5 times their salary, 20% more than the typical 4.5 
  • However, availability is limited to around 5,000 households 
  • Nationwide says it is not ready to bring back 5 per cent deposit mortgages yet 

Britain’s second-largest mortgage provider is increasing the amount it will lend to first-time buyers based on their salary.

Nationwide will allow people looking to get on the housing ladder to borrow 5.5 times their annual income, more than the 4.5 loan-to-income ratio most lenders offer.

However, borrowers will need to take out one of the building society’s standard five or ten-year fixed rate mortgages in order to benefit.

Helping hand: Nationwide’s scheme will allow borrowers to get a mortgage equivalent to 5.5 times their salary – but they will have to commit to a longer-term fix in return

The scheme, called ‘Helping Hand,’ will be launched on 26 April. Borrowers will need a deposit of at least 10 per cent, as that is the minimum Nationwide currently requires across all its products. 

The building society has said it will have £1bn available to lend via its Helping Hand loans. 

Based on the average mortgage size of around £200,000, this would mean around 5,000 households would benefit.

It said it was unable to offer more than that because of regulatory limits.

The lender will apply a lower stress rate on the mortgages, and combined with the higher loan to income ratio it said this would ‘enable an uplift in affordability of up to 20 per cent.’

Helping Hand will be available on both houses and flats, but not for those buying using shared ownership.

In addition, self-employed borrowers won’t be able to use the scheme.

Average house prices and deposits for first-time buyers have both risen in the last year

Average house prices and deposits for first-time buyers have both risen in the last year

The bank’s standard lending criteria will also apply, which will mean that borrowers will need at least a 15 per cent deposit if they want to borrow more than £500,000 and 20 per cent if they want to borrow more than £750,000.

Those buying a new build will also need a minimum deposit of 85 per cent.

‘We are very conscious that affordability and raising a deposit are the two major barriers to home ownership for first-time buyers,’ Henry Jordan, mortgage director at Nationwide, told This is Money.  

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

Asked whether the affordability tests would be stricter for those wanting to borrow 5.5 times their income, Jordan added: ‘We are making some changes to the affordability calculation to allow us to lend more, and applying some added controls in the background.’

He said that having things like large amounts of unsecured credit might mean the loan-to-income ratio was lowered.  

Nationwide was the first lender to bring back a 10 per cent deposit mortgage after many deals were pulled from the market due to the pandemic.

However, it is yet to return a 5 per cent product to its range – despite other lenders doing so this week as part of a Government-backed scheme.

Jordan added: ‘We don’t have any confirmed plans currently, but we do see it as a core component of our offer to first-time buyers.

‘It is on our agenda and we will look at it over the next few months.’

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