Published: 27/04/2021Yesterday Nationwide, the UK biggest building society, launched its Helping Hand mortgages which will allow first time buyers to borrow up to 5.5 times earnings, 20% more than the typical 4.5x maximum. Loans will need to be for a fixed term of five or ten years with a minimum deposit of 10% of the property price (or 15% for a new build or to borrow over £500,000, and 20% to borrow more than £750,000).
The interest rate has not been disclosed, but Nationwide says it will be above its five-year fixed rate. Affordability tests will be adjusted to facilitate qualification for these larger loans. There will be minimum income limits at around the median level of UK earnings (£34,567 for men and £30,258 for women) and they will not be available to the self-employed or for shared ownership properties.
Due to regulatory limits just £1bn of loans are available under the scheme; this equates to 5,000 loans at the average mortgage amount of £200,000. Nationwide is also considering reintroducing a 5% mortgage, as several other lenders have done as part of the Government-backed scheme.
Raising a deposit, passing affordability checks and securing a big enough mortgage are significant challenges, especially for first time buyers. Just over a third of 24-35 year olds own properties, compared to over half twenty years ago. House prices in London are currently 18.0 times average earnings, compared to 10.7 times across the UK.