UK building society Nationwide is increasing the amount it will lend to first-time buyers in a move it claims will help increase home ownership.
The company on Tuesday said buyers with deposits as low as 10% will be able to borrow five and a half times their earnings on a longer-term mortgage.
It added that it would adjust the stress tests it does on applicants when assessing mortgage affordability.
A buyer working full time earning £50,000 can now borrow £275,000, up from £250,000. Self-employed applicants are ineligible, Britain’s biggest building society said.
The £1bn ‘Helping Hand’ initiative will launch on April 26 and products will have the same rates and features as Nationwide’s current standard mortgage range.
Nationwide 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%, citing figures from the Institute for Fiscal Studies.
Homeownership among 25- to 34-year-olds fell to 35% from 35% in the two decades to 2017, it added.
The announcement was made in the week that major UK banks returned to 5% deposit mortgage lending under a new UK Government guarantee scheme. Lenders including Lloyds, HSBC, 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 would not disclose the rate it will use in its Helping Hand scheme, only that it is above the five-year fixed rate – currently 3.34% on its 90% mortgage – but below its usual test rate.
