Nationwide has become the first major mortgage lender to allow first-time buyers to borrow up to six times their income on loans of up to 95%.

A first-time buyer couple with a joint income of £50,000 could now borrow up to £300,000 under the new borrowing limit which comes into effect this week.

It has been standard for most lenders to limit borrowing to first-time buyers to 4.5 times their salary. This means the loan amount must not exceed the borrowers’ income if it were multiplied by 4.5.

In recent months some lenders, including Halifax, have come forward to offer borrowing of up to 5.5 times their income.

Now Nationwide’s competitive offering will come as more welcome news to first-time buyers, many of whom struggle with affordability when applying for a mortgage.

The new borrowing limit will be available through the building society’s Helping Hand mortgage, which launched in 2021 to support first-time buyers by offering better lending options.

The extended Helping Hand with the higher borrowing limits will be available from Tuesday 24 September on five or ten-year fixed rates up to 95% loan-to-value (LTV) loans. This means borrowers will need a 5% deposit at least.

Nationwide said it would give potential homeowners a 33% uplift versus its standard lending at 4.5 times income.

And it comes as Nationwide also reduces its rates for first-time buyers in a move which means it will be, from 24 September, offering a sub-5% rate on its standard range to those with a 5% deposit.

First-time buyer boost: How the numbers stack up

A first-time buyer couple with a joint income of £50,000 could now borrow up to £300,000 with Helping Hand. This is compared to around £225,000 without this boost. It’s an increase of £75,000, assuming a 5% deposit and no other costs impact affordability.

Debbie Crosbie, Nationwide’s chief executive, said: “Helping Hand has supported around 40,000 people onto the property ladder since we launched it three years ago.

“We want to do more and are boosting the scheme to six times income and increasing the maximum loan size. This, alongside our most recent rate cuts, further strengthens our market-leading position and demonstrates that, as one of the UK’s largest lenders, Nationwide continues to put first-time buyers first.”

What’s the verdict on Nationwide’s new borrowing limits?

Mortgage brokers have also welcomed the enhanced Helping Hand mortgage as a much-needed addition to the first-time buyer market.

Nicholas Mendes, mortgage technical manager at John Charcol, described Nationwide’s new borrowing limit as a ‘gamechanger’ for first-time buyers and one which will ‘deliver a powerful boost to help more people step onto the property ladder’.

“With the introduction of a groundbreaking offer that allows first-time buyers to borrow up to six times their income, Nationwide is truly putting ‘first-time buyers first’ and addressing the significant affordability issues many face today,” he said.

He added: “This increased borrowing power can make all the difference for aspiring homeowners, especially in a challenging market where property prices often feel out of reach.

“By providing this additional financial flexibility, Nationwide is turning dreams of homeownership into reality for thousands who may have previously struggled to afford their first home.”

 

Source = Nationwide unveils new first-time buyer borrowing limits – What Mortgage