Nationwide, the UK’s largest building society, has announced a significant boost for first-time buyers.
The lender is offering mortgages of up to six times the borrower’s income with just a five per cent deposit.
This move, part of Nationwide’s Helping Hand scheme, marks a 33 per cent increase in borrowing potential compared to their standard offer of four-and-a-half times their income.
For example, a couple earning £50,000 could now borrow up to £300,000 towards their first home, £75,000 more than under the standard lending cap.
The new policy applies to mortgages with a loan-to-value (LTV) ratio of up to 95 per cent, providing a vital lifeline for buyers struggling with affordability in today’s challenging housing market.
Iain Swatton, Director at Exemplar Financial Services said: “Nationwide’s rate reductions and changes to income multiples are a huge win for buyers, especially with the move to six times income on Helping Hand products. The increased LTIs on 5+ year fixed rates are well-suited for today’s market, where house prices are high and affordability is tough.
“As long as the rates stay competitive, without penalising those opting for longer terms, this could be the way forward—but pricing will be key for its success.”
Nationwide’s move comes amid intensifying competition between mortgage providers. Other major lenders, including Halifax and Lloyds, have recently increased their borrowing caps to 5.5 times annual income.
The building society is also cutting its mortgage rates, becoming the first major lender to offer a sub- five per cent rate on 95 per cent LTV mortgages for first-time buyers.
Additionally, Nationwide has raised its maximum loan size from £500,000 to £750,000 for loans between 90 per cent and 95 per cent LTV.
This initiative follows a report by the Building Societies Association suggesting first-time buyers are facing the toughest conditions in 70 years to buy a home.
Industry experts view this as a significant development in the first-time buyer market. David Hollingworth from L&C Mortgages called Helping Hand a “front runner” in making home-ownership more accessible.
Nationwide’s initiative is expected to have a significant impact in regions with high property prices. Matt Smith, Rightmove’s mortgage expert, noted that the package will particularly benefit areas like London and the South East, where saving for deposits is challenging.
The average first-time buyer property price in the UK is £226,794, but this varies widely across the country. In London, for instance, the average first-time buyer house price stands at £452,797.
Since April 2021, the average loan size for first-time buyers using Helping Hand has been about 60 per cent higher than those without it, at £269,169 compared to £168,699.
Nationwide’s Chief Executive, Debbie Crosbie, emphasised that this move cements their “market leading position” in supporting first-time buyers. “We continue to put first-time buyers first,” she stated.
While Nationwide’s initiative offers significant benefits, experts caution borrowers to consider the long-term implications.
Elliott Culley, director at Switch Mortgage Finance, noted that “higher Loan To Income products are very popular with first-time buyers” but warned that the loan-to-income ratio gap may continue to stretch as house prices rise.
He continued: “It is no surprise to see other lenders joining the party with enhanced LTIs. Lenders are looking for more business and realise they can open the door for many other first-time buyers with these changes.”
Scott Taylor-Barr of Barnsdale Financial Management suggested that the demand for longer-term fixed deals could spike when interest rates are perceived to be low, as borrowers seek to lock in favourable rates.
He said: “The longer the length of the deal, the more flexibility it needs to be attractive to borrowers. Traditionally, people would shy away from fixing for longer than five years, as the risk soon outweighed the benefits in customers’ minds.
“Fixed rates with extra flexibility change that risk/benefit calculation; if you can make overpayments, move house and do so without incurring a few thousand pounds of early repayment charge, then they become more appealing.”
Mark Eaton from April Mortgages welcomed the move, stating it’s “helping more homeowners onto the property ladder”.
He said: “House prices are high but longer term fixed rates can mean higher maximum loan to incomes, which means more help for more borrowers. The high street is slowly shifting towards longer term fixed rates, which are an increasingly popular proposition in today’s market.”
However, Dariusz Karpowicz of Albion Financial Advice reminded Britons that “rate is still king when it comes to making decisions”, suggesting that while helpful, the scheme’s success may ultimately depend on the competitiveness of its interest rates.
However he concluded: “If wages don’t keep pace with rising house prices, we could start seeing lenders offering mortgage terms stretching long into retirement.
“Flexibility is great, but affordability will always be the driving factor for most buyers. It’s possible that more and more borrowers, especially younger ones, will opt for these future-proof products, but only if the price is right.”
