Nationwide made a huge pitch to first time buyers in London and the south east today when it said it will lend up to six times salary at rates below 5% - even to borrowers with only a small deposit.
Britain’s biggest building society said it was the first major lender to offer multiples of six times allowing couples with just a five per cent deposit earning a combined £100,000 income to borrow up to £600,000.
Rates for first tine buyers are being cut by as much as 0.31% bringing sub-5% mortgages within reach of property debutantes needing to raise up to 95% of their home value, for the first time in two years.
Nationwide also increased its maximum loan sizes, to up to £750,000.
The new package, which comes into effect tomorrow, is being offered through its Helping Hand brand, which was launched in 2021.
It is likely to be particularly popular in London where the average first-time buyer house price is £452,797. To date almost a quarter of the Helping Hand mortgages advanced have been to buyers in the capital .
Across the country as a whole, the average loan size for first-time buyers without Helping Hand is £168,699, whereas for those Helping Hand, the average loan size is 60% higher at £269,169.
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.”
David Hollingworth, associate director, at brokers L&C Mortgages, said: “Helping Hand has been a front runner in expanding the range of options open to first-time buyers who continue to struggle with affordability. Building an adequate deposit is hard enough especially when the available mortgage borrowing is capped, and prices remain high.
“Opening the potential for higher borrowing amounts for the right borrowers will help target the twin challenges that first-time buyers face across the UK. Using the existing experience and success of Helping Hand to further enhance the maximum multiple will give more prospective first-time buyers the hope that ownership can become a reality.”
Matt Smith, Rightmove’s Mortgage Expert said: “This package of measures is an encouraging development in the first-time buyer market, as it directly addresses a major barrier that many face in being able to borrow enough to take that important first step on the housing ladder. It is likely to be particularly beneficial in areas such as London and the South East where house prices are higher, and currently the average asking price of a home is more than five times the average salary of two people.
“ We’ve been highlighting affordability as a key issue facing first-time buyers this year and calling for innovations that help overcome these challenges in a responsible way. We welcome this move and hope this is the start of a new and accelerated wave of support for first-time buyers. The timing of this announcement will be welcomed by many first-time buyers, as we’re seeing a much more active housing market than at this time last year, with buyer demand increasing into the traditionally busy Autumn season.”
Aaron Stritt, direct at brokers Trinity Financial, said: “We are at the stage where the UK’s biggest building society is offering first time buyers income stretch mortgages to help them get on the property ladder and to bring more life into the housing market. The largest lenders are normally very cagey about offering six times salary and 5.5 times salary is only normally available to higher earners.
“The rate hikes brought on by the mini budget have made life very difficult for many first time buyers and they have not been able to borrow anywhere near enough money to get on the property ladder especially in London. The mortgage market is also pretty flat at the moment as borrowers wait for rates to come down further. Halifax launched a first time buyer scheme recently although borrowers will probably be able to get more money through Nationwide now.
Some of the smaller lenders offer six times salary although they normally charge higher rates.”
