Nationwide to increase amounts it will lend to first-time buyers

First-time buyers with deposits as low as 10% will be able to borrow five and a half times their income when taking out a longer-term mortgage, Britain’s biggest building society has announced.

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% loan-to-value (LTV).

The initiative will launch on April 26 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% deposit and no other costs impacting affordability.

Nationwide said there will be £1 billion 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%, while the average income has risen by 18%.

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.

Mortgages are portable if people move house within their initial deal period. If people wanted to borrow more this would be subject to full assessment.

Henry Jordan, director of mortgages at Nationwide Building Society, said: “Nationwide was founded to help people into homes of their own and that remains the case as much today as it did 135 years ago.

“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.

“Our new helping hand option supports borrowers in meeting the affordability requirements, making it easier for them to buy a home of their own.”

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.