Home Money Nationwide’s new mortgage rule offers less help to first-time buyers…

Nationwide’s new mortgage rule offers less help to first-time buyers…

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Tough times: Nationwide has increased the minimum income threshold for one-time applicants for its Helping Hand mortgage

Nationwide has dealt a blow to first-time buyers on modest incomes by raising the minimum income threshold on its Helping Hand mortgage for its sole applicant from £35,000 to £40,000.

‘The average annual gross income in the UK is £37,430. So Nationwide has just eliminated large swathes of potential first-time buyers across the country,” Ben Perks, CEO of Orchard Financial Advisers, told Newspage.

Prospective buyers in places like London and the South East, where property prices are notoriously high, are likely to be hardest hit by Nationwide’s new rule.

The minimum income for joint applicants has remained the same, at £55,000, a spokesperson for Britain’s largest building society told This is Money.

The lender’s Helping Hand mortgage is designed to give eligible first-time buyers the opportunity to borrow up to six times their annual income.

In theory, its goal is to give first-time buyers, who would otherwise struggle to borrow enough to move up the property ladder, the opportunity to borrow more.

Tough times: Nationwide has increased the minimum income threshold for one-time applicants for its Helping Hand mortgage

Nationwide’s Helping Hand mortgage is generally available to first-time buyers who have a deposit of at least 5 per cent and will take out one of the building society’s five or ten-year fixed rate mortgages.

However, first-time buyers who are self-employed or using a scheme such as shared ownership or right to buy are not eligible for this.

A Nationwide spokesperson said: ‘The ability to borrow enough on a mortgage remains a major barrier for first-time buyers trying to buy their own home.

‘We remain committed to tackling this through Helping Hand, which we expanded in September to give first-time buyers the opportunity to borrow up to six times their income.

‘However, regulations limit the number of high loan-to-income ratio mortgages that lenders can offer to no more than 15 percent of total new loans.

‘This small change will ensure we can stay within that limit, especially given the strong demand we continue to see for Helping Hand. “We will continue to periodically review the minimum income requirements.”

Changes to the lender’s minimum income threshold for its single Helping Hand mortgage came into effect on January 21.

What is the Helping Hand mortgage?

Nationwide’s Helping Hand offers first-time buyers the chance to borrow more.

It is available to eligible first-time buyers who open a 5- and 10-year fixed-rate mortgage with the mutual, up to 95 percent of the loan value.

On its website, Nationwide says: ‘A couple, who are eligible first-time buyers, have a joint income of £55,000, a 5 per cent deposit and no other costs that affect how much they can afford.

With a helping hand, they may be able to borrow up to £330,000. This compares to the £247,500 they could borrow without one.

Jack Tutton, director of SJ Mortgages, told Newspage: ‘Nationwide’s decision to increase the minimum income for single applicants to have access to its Helping Hand product is another kick in the teeth for those trying to buy into their own home.

‘It is often these people who find it most difficult to achieve their dream of owning their own home.

‘Their decision to increase the minimum income requirement from £35,000 to £40,000 now means that to be eligible for this, you must earn more than the average UK salary for full-time employees.

“This will further aggravate the problem for those who want to enter the real estate sector.”

Ken James, director of Contractor Mortgage Services, told Newspage: “Helping Hand sweeps the rug from under the feet of many potential first-time buyers, given that if you are the only applicant on £35,000 a year six times as much, this is only £210,000, then with a potential 5 per cent deposit the maximum the client would be considering purchasing would be a property of approximately £221,000.

‘I don’t think the regulatory limits would have been pushed too far in these figures.

‘The fact that the lender goes up to £750,000 with a 95 per cent loan means only people on higher incomes would be eligible. This is a bad move that will hurt the first-time buyer market.’

However, Graham Cox, director of Bridging Hub, told Newspage he believes Nationwide’s move is sensible.

Cox said, “I actually think this is prudent.” Someone earning £35,000 a year doesn’t have much leeway for discretionary spending these days, so borrowing from a high earner five or six times on what is a relatively modest salary is asking for trouble.

“Widening credit conditions so that people end up going deeper into debt is not the answer; lower house prices are.”

In November, Nationwide chief executive Debbie Crosbie said its Helping Hand mortgages had helped around 40,000 people into home ownership since launching in 2021.

How to find a new mortgage

Borrowers who need a mortgage because their current fixed-rate agreement is ending or because they are buying a home should explore their options as soon as possible.

Quick mortgage search links with This is Money partner L&C

> Mortgage rate calculator

> Find the right mortgage for you

What happens if I need to remortgage?

Borrowers should compare rates, talk to a mortgage broker and be prepared to take action.

Homeowners can close a new deal six to nine months in advance, often with no obligation to accept it.

Most mortgage agreements allow fees to be added to the loan and are only charged when requested. This means borrowers can get a rate without paying expensive processing fees.

Please note that by doing this and not paying off the fee upon completion, interest will be paid on the fee amount for the entire term of the loan, so this may not be the best option for everyone.

What happens if I am buying a house?

Those with agreed-upon home purchases should also try to lock in rates as early as possible, so they know exactly what their monthly payments will be.

Buyers should avoid overreaching and be aware that home prices may fall as higher mortgage rates limit people’s borrowing capacity and purchasing power.

How to compare mortgage costs

The best way to compare mortgage costs and find the right deal for you is to speak to a broker.

This is Money has a long-standing partnership with free broker L&C, to provide you with free, expert mortgage advice.

Interested in seeing today’s best mortgage rates? Wear This is the best mortgage rate calculator from Money and L&C to show offers that match your home value, mortgage size, term, and fixed rate needs.

If you’re ready to find your next mortgage, why not use L&C’s Online Mortgage Finder? It will search thousands of offers from over 90 different lenders to discover the best deal for you.

> Find your best mortgage deal with This is Money and L&C

However, please note that rates can change quickly, so if you need a mortgage or want to compare rates, speak to L&C as soon as possible so they can help you find the right mortgage for you.

Mortgage service provided by London & Country Mortgages (L&C), which is authorized and regulated by the Financial Conduct Authority (registration number: 143002). The FCA does not regulate most buy-to-let mortgages. Your home or property can be repossessed if you don’t keep up with your mortgage payments.

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