Nationwide Building Society has changed its mortgage affordability rules so that homebuyers and those looking to remortgage can borrow more.
Following a rule clarification by the Financial Conduct Authority (FCA), Nationwide has reduced its affordability stress rates by between 0.75 and 1.25 percentage points. Affordability stress rates are used by lenders to check whether borrowers would still be able to afford their mortgage if rates go up in the future. The changes to the building society’s standard stress rate and the rate applied to eligible first-time buyers and home movers fixing their deal for at least five years, mean that the average mortgage applicant can now borrow around £28,000 more than they could previously.
However, Nationwide, along with other lenders, is still subject to the Bank of England’s lending cap which means that lending to those wanting to borrow 4.5 times their income is capped at no more than 15% of the building society’s loans.
Henry Jordan, Nationwide’s Director of Home said: “Whilst the FCA’s clarification on affordability stress rates could support increased levels of home ownership, the Bank of England’s flow limit dampens its potential impact. That’s why Nationwide continues to call for a review of the 15% limit, so that we, and other lenders, can help more people access the long-term benefits of home ownership.”
Who do Nationwide’s new changes apply to?
Nationwide’s affordability rule changes apply to all types of borrowers, including first-time buyers, home movers, and those looking to remortgage. Those applying for the building society’s Helping Hand scheme, which allows borrowing of up to six times income at up to 95% loan-to-value, will also benefit.
According to the building society, a first-time buyer earning £55,000 using the Helping Hand scheme could now borrow up to £330,000, an increase of almost £26,000.
However, those who will see the largest boost to their borrowing are those who are remortgaging with no additional borrowing. For example, a customer remortgaging on a £45,000 income could see their borrowing limit rise from £235,500 to £278,100 — an increase of more than £42,000.
Mr Jordan said: “Affordability remains a key challenge and this change, along with our well-established and popular Helping Hand proposition, shows we’re serious about tackling it.”
