First-time buyers with deposits as low as 10 per cent will be able to borrow five and a half times their income when taking out a longer-term mortgage, the UK’s biggest building society said this morning.
Nationwide Building Society said that under its “helping hand” initiative, first-time buyers across the UK will have the option when taking out a five or 10-year fixed-rate mortgage at up to 90 per cent loan-to-value (LTV).
The initiative will launch next week, on 26 April, and products will have the same rates and features as Nationwide’s current standard mortgage range.
The change would mean, for example, that a couple with a joint income of £50,000 would be able to borrow up to £275,000, rather than £225,000 previously, assuming a 10 per cent deposit and no other costs impacting affordability.
Nationwide said there will be £1bn of helping hand mortgage lending available to support more first-time buyers on to the property ladder, meaning thousands of aspiring buyers will be helped.
The society said that in the past 10 years the average price of a first-time buyer property has increased by 41 per cent, while the average income has risen by 18 per cent.
First-time buyers benefit from £500 cashback on completion of their mortgage.
Applications will still be subject to robust underwriting checks, Nationwide said, including full assessment of credit scores and additional credit commitments, to ensure the society continues to lend responsibly.
The scheme will be available to applicants who are employed but not those who are self-employed.
The announcement was made in the week that several high street giants returned to 5% deposit mortgage lending under a new UK Government guarantee scheme.
Lenders including Lloyds, HSBC UK, NatWest, Barclays, Santander and Virgin Money are taking part in the scheme.
The choice of low deposit mortgages on the market plunged in the early days of the coronavirus crisis as lenders became cautious about “riskier” loans.
Nationwide said it is focusing on its 10% deposit offering.