Nationwide has dealt first-time buyers on modest incomes a blow by upping the minimum income threshold on its sole applicant Helping Hand mortgage from £35,000 to £40,000.
‘Average gross annual earnings in the UK are £37,430. So Nationwide have just cut out huge swathes of perspective first-time buyers across the country’, Ben Perks, managing director of Orchard Financial Advisers, told Newspage.
Prospective buyers in locations like London and the South East, where property prices are notoriously high, are likely to be hardest hit by Nationwide’s new rule.
The minimum income for joint applicants has stayed the same, at £55,000, a spokesman for Britain’s biggest building society told This is Money.
The lender’s Helping Hand mortgage is designed to give eligible first-time buyers the opportunity to borrow up to six times their annual income.
It is, in theory, aimed at giving first-time buyers who might otherwise struggle to borrow enough to get on the property ladder, the chance to borrow extra.
Tough times: Nationwide has upped the minimum income threshold for sole applicants of its Helping Hand mortgage
Nationwide’s Helping Hand mortgage is typically available to first-time buyers who have a deposit of at least 5 per cent and will take out one of the building society’s five or ten year fixed rate mortgages.
However, first-time buyers who are self-employed or using a scheme like shared ownership or Right to Buy are ineligible for it.
A Nationwide spokesperson said: ‘The ability to borrow enough on a mortgage remains a significant hurdle to first-time buyers attempting to purchase a home of their own.
‘We remain committed to tackling that through Helping Hand, which we extended in September to give first-time buyers the opportunity to borrow up to six times income.
‘However, regulations limit the number of high loan-to-income mortgages that lenders can offer to no more than 15 per cent of total new loans.
‘This small change will ensure that we can remain within that limit, especially given the strong demand we continue to see for Helping Hand. We will continue to keep the minimum income requirements under regular review.’
The changes to the lender’s minimum income threshold on its sole applicant Helping Hand mortgage kicked in on 21 January.
Jack Tutton, a direector at SJ Mortgages, told Newspage: ‘Nationwide’s decision to increase the minimum income for sole applicants to have access to their Helping Hand product is yet another kick in the teeth to those trying to buy on their own home.
‘It is often these people who find it the hardest to achieve their dream of owning their own home.
‘Their decision to increase the minimum income required from £35,000 to £40,000 now means that to be eligible for this, you have to be earning more than the UK’s average salary for full time employees.
‘This will compound the issue further for those wanting to get onto the property ladder.’
Ken James, a director at Contractor Mortgage Services, told Newspage: ‘Helping Hand sweeps the rug from under the feet of many prospective first-time buyers, given that if you are a sole applicant on £35,000 a year at six times this is only £210,000, then with a potential 5 per cent deposit the max the client would be looking at buying at would be an approximate £221,000 property.
‘I don’t think that the regulatory limits would have been pushed too far on these figures.
‘The fact that the lender will go to £750,000 at 95 per cent lending means that only the high earners would be eligible. This is a crappy move that will hurt the first-time buyer market.’
However, Graham Cox, a director at Bridging Hub, told Newspage he thinks Nationwide’s move is sensible.
Cox said: ‘I actually think this is prudent. Someone on £35000 per annum doesn’t have a lot of discretionary spending wiggle room in this day and age, so borrowing at a high five r six times income on what is a relatively modest wage is asking for trouble.
‘Extending credit terms so people end up in ever greater debt is not the answer, lower house prices are.’
In November, Nationwide’s chief executive Debbie Crosbie said its Helping Hand mortgages had helped around 40,000 people get on the property ladder since it launched in 2021.
Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.
