Nationwide gives first time buyers a borrowing boost

Nationwide gives first time buyers a borrowing boost
Nationwide has launched mortgages which enable first time buyers to borrow more than five times their income when locking into a long-term fixed rate.

The building society’s ‘Helping Hand’ mortgage gives first time homebuyers the chance to borrow up to 5.5 times their income when taking out either a 5 or 10-year fixed rate deal. First time buyers can usually only borrow up to 4.5 times their income.

Nationwide will provide £1 billion of lending via Helping Hand, and will apply a lower stress rate as well as the higher maximum loan-to-income ratio. A stress test requires lenders to make sure that borrowers could afford their mortgage if interest rates went up by 3% during the first five years of the loan.

According to the building society, a first time buyer couple with a joint income of £50,000 can borrow up to £275,000 with Helping Hand, rather than the £225,000 they could borrow previously. This assumes that the couple has a 10% deposit to put down and no other costs which might affect affordability, and that they are signing up to a 5 or 10-year fixed rate mortgage.

Helping Hand won’t be available to those who are self-employed, or who are buying a shared ownership property and is available to first time buyers with at least a 10% deposit. You can find out more about deposits in our guide How much deposit do I need to buy a house?

Options for those with smaller deposits

Although Nationwide won’t currently lend to anyone with less than a 10% deposit, the government’s new Mortgage Guarantee Scheme means that there is now a much wider range of mortgage options available if you only have 5% deposit to put down.

The recently launched scheme enables first time buyers and existing homeowners with a 5% deposit to secure a mortgage on homes worth up to £600,000. The government will provide lenders with a guarantee o n the mortgages offered, which means if the property is repossessed and sold for less than the outstanding mortgage, it will cover some of the lenders’ losses. Find out more in our article ‘The mortgage guarantee scheme explained’

Some lenders have recently re-entered the 95% mortgage market without using the Mortgage Guarantee Scheme. Our online Mortgage Finder tool can show you which deals you might qualify for and how much you may be able to borrow.
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