First time buyers can now borrow 5.5 times their income
The Nationwide Building Society has launched a product which, controversially, allows some first time buyers to borrow 5.5 times their income.
From April 26 Nationwide’s Helping Hand product allows first timers the option of borrowing up to 5.5 times their income when taking a five or 10-year fixed rate mortgage up to 90 per cent Loan To Value – the most currently offered by any major high street lender.
Nationwide is explicitly targeting disenchanted private renters, saying: “Many renters still aspire to own their own home, but affordability remains one of the key issues stopping many from getting on the housing ladder. In the last 10 years the average price of a first time buyer property has increased by 41 per cent, while the average income has risen by just 18 per cent.”
There will be £1 billion of lending available via Helping Hand and the society will apply a lower ‘stress rate’ and higher maximum loan-to-income ratio where applicants opt for a standard five or 10-year fixed rate product.
The change means a first-time buyer couple with a joint income of £50,000 can now borrow up to £275,000 with Helping Hand, rather than the £225,000 they could borrow previously, assuming a 10 per cent deposit and no other costs impacting affordability.
The average first-time buyer property price in the UK is £196,2233. However, this varies widely across the country with the average first-time buyer property in London standing at £416,682, compared to just £110,556 in the North of England.
Nationwide insists that all applications will be subject to “robust underwriting checks, including full assessment of credit score and additional credit commitments.”
Henry Jordan, mortgages director at the society, says: “In the UK there are nearly five million private rented households, but many of these renters have dreams and aspirations of buying a home of their own. However, with household incomes rising at a slower rate than house prices, many first-time buyers are finding it increasingly hard to get onto the property ladder.”
