The UK’s biggest building society is increasing the sums it is willing to lend first-time buyers in a move it said would enable homeownership for many people who have been frozen out of the market.
Nationwide will allow new buyers to take out loans worth up to 5.5 times their earnings and adjust the stress tests it does on applicants when assessing mortgage affordability.
As a result of the changes, the maximum sum a buyer earning £50,000 can borrow will rise from £225,000 to £275,000. sin embargo, the larger loans will not be available to self-employed applicants.
El movimiento, which the society is calling Helping Hand, will only apply to first-time buyers who are borrowing 90% or less of the property price and are taking out a five- or 10-year fixed-rate mortgage.
El lunes, several big lenders launched 95% mortgages using the government’s guarantee scheme to back the deals.
sin embargo, as Guardian analysis has shown, in many parts of the country raising a deposit is only part of the battle for would-be buyers, and passing the affordability checks for a large enough loan remains difficult.
According to the Institute for Fiscal Studies, homeownership among 25- to 34-year-olds fell from 55% a 35% in the two decades to 2017, and over the second half of that period the average price of a first-time buyer property increased by 41%, while the average income rose by 18%.
Most lenders do not currently offer 5.5 times income borrowing, and those that do often set high minimum earnings for borrowers.
Nationwide said that it would set a minimum to begin with, but that it was around the level of the UK median earnings for those in their 30s (currently £30,258 for a woman and £34,567 for a man).
Lenders are obliged to check that borrowers can afford the monthly repayments on a rate higher than the standard variable rate they offer, rather than the mortgage rate that is being signed up for, and this means even the cheapest deals are hard to obtain.
Nationwide would not disclose the rate it will use in its Helping Hand scheme, only that it is above the five-year fixed rate – currently 3.34% on its 90% mortgage – but below its usual test rate.
The society said it was trying to support first-time buyers, and would be checking they were creditworthy and had taken advice from its staff or a broker, before offering the mortgage.
It said it had a “very prudent” lending policy and would be within the regulator’s rules on lending, which only allow 15% of mortgages to be above 4.5 times borrowers’ income. It has allowed £1bn for the scheme which it said could last up to a year.
Borrowing on new builds will remain capped so that anyone buying a brand new house can only borrow up to 85% of its cost and anyone buying a flat can borrow up to 75%, although the new income multiples will apply if needed.
Henry Jordan, the director of mortgages at Nationwide, dicho: “Nationwide was founded to help people into homes of their own and that remains the case as much today as it did 135 hace años que.
“In the UK there are nearly 5m private rented households, but many of these renters have dreams and aspirations of buying a home of their own. sin embargo, with household incomes rising at a slower rate than house prices, many first-time buyers are finding it increasingly hard to get on to the property ladder.”