Britain’s biggest building society is to offer first-time buyers loans of up to six times their salary with a maximum figure of £750,000, in a first for a major lender.
The new deals will allow a couple earning £50,000 between them the opportunity to borrow £300,000, which is some £75,000 more than previously.
However, couples on a higher joint income with a 10 percent deposit will see the maximum amount they are allowed to borrow rise from the current maximum of £500,000 to £750,000.
The deal from Nationwide suggest it is keen to grab a greater share of the first-time buyer market in a move that is likely to trigger others to follow suit and perhaps launch even bigger loans in relation to salary.
However, moves by banks and building societies to offer mega loans has brought its own problems in the past. For example, it contributed to a house price bubble before the financial crash of 2008 that left buyers in negative equity when it burst.
Nationwide, which is offering the deals under the brand Helping Hand mortgages, said they will go live to new borrowers from tomorrow.
The organisation said the mortgages are aimed at supporting the government’s housing ambitions and shows the value of being part of a modern mutual that is run for the benefit of its members.
According to UK Finance data, around 5 percent of all house purchase loans were over £500,000 in the six months to June 2024. And the figure was an even higher 22 percent in London.
Debbie Crosbie, Nationwide’s Chief Executive, said: “Helping Hand has supported around 40,000 people onto the property ladder since we launched it three years ago.
“We want to do more and are boosting the scheme to six times income and increasing the maximum loan size. This, alongside our most recent rate cuts, further strengthens our market-leading position and demonstrates that, as one of the UK’s largest lenders, Nationwide continues to put first-time buyers first.”
Nationwide’s House Price Index3 shows the average first-time buyer property price in the UK is £226,794, however, this varies widely across the country.
Helping Hand has proved particularly useful in the Outer South East, where the average first-time buyer house price stands at £262,504, and where uptake of Helping Hand has been highest.
Nationwide responded to concerns that young people may take on loans they cannot afford to pay, saying each application “ will continue to be subject to robust underwriting checks, including full assessment of credit score and additional credit commitments”.
David Hollingworth, Associate Director, Communications at L&C Mortgages, said: “Helping Hand has been a front runner in expanding the range of options open to first-time buyers who continue to struggle with affordability.
“Building an adequate deposit is hard enough especially when the available mortgage borrowing is capped, and prices remain high. Opening the potential for higher borrowing amounts for the right borrowers will help target the twin challenges that first-time buyers face across the UK. Using the existing experience and success of Helping Hand to further enhance the maximum multiple will give more prospective first-time buyers the hope that ownership can become a reality.”
Matt Smith, Rightmove’s Mortgage Expert, said: “This package of measures is an encouraging development in the first-time buyer market, as it directly addresses a major barrier that many face in being able to borrow enough to take that important first step on the housing ladder.
“It is likely to be particularly beneficial in areas such as London and the South East where house prices are higher, and currently the average asking price of a home is more than five times the average salary of two people.
“We’ve been highlighting affordability as a key issue facing first-time buyers this year and calling for innovations that help overcome these challenges in a responsible way. We welcome this move and hope this is the start of a new and accelerated wave of support for first-time buyers.
“The timing of this announcement will be welcomed by many first-time buyers, as we’re seeing a much more active housing market than at this time last year, with buyer demand increasing into the traditionally busy Autumn season.”
