A major mortgage lender has said it will become the first high-street brand to offer first-time buyers with a deposit of just 5 per cent the ability to borrow six times their income
Nationwide is offering first-time buyers taking out a five or 10-year fixed deal the ability to borrow even more, up from 5.5 times their income, as of tomorrow (Tuesday 24 September).
It has said the move is to help address the affordability challenges that prevent many from getting on to the property ladder.
Typically, lenders offer borrowers the option of borrowing up to 4.5 times their income, though some lenders allow slightly bigger income multiples – though generally only for high earners.
Aaron Strutt, of brokers Trinity Financial, said: “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 that started with 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 your salary but they normally charge higher rates.
Nationwide’s new deal means a couple with a joint income of £50,000 are able to borrow up to £300,000. This is £75,000 more than standard lending.
It is also increasing its maximum loan sizes, including for those with a deposit of 10 per cent or less, which will increase from £500,000 to £750,000.
David Hollingworth, associate director, Communications at L&C Mortgages, said: “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.”
It comes after a number of lenders cut their mortgage rates with both two- and five-year fixed deals now available for below 4 per cent.
Experts expect rates to fall further in anticipation of the Bank of England cutting interest rates from their current level of 5 per cent.
Nationwide is also cutting mortgage rates. First-time buyer rates will be reduced by up to 0.31 percentage points, making it the first major lender to offer a sub-5 per cent rate to those with a 5 per cent deposit.
