First-time buyers could borrow up to £66,000 more on average thanks to a new mortgage offered by Leeds Building Society.
Britain’s fifth-largest building society will allow some first-time buyers to take out loans of up to 5.5 times their annual income, up from the usual 4.5 times.
However, they must meet certain criteria, including a A minimum household income of £40,000 to qualify for the product, known as ‘income plus’.
The building society says the average first-time buyer could borrow a maximum of £356,000 through Income Plus, compared to £290,000 with its standard loan, a difference of £66,000.
Individual and joint borrowers, including those who are self-employed, will be able to apply, and loans will cover up to 95 per cent of the value of the property.
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Boost: Aspiring homeowners with a minimum household income of £40,000 could borrow up to 5.5 times their income in Leeds
Income plus mortgages are fixed five-year agreements. Rates start from 4.4 per cent for those purchasing with at least a 25 per cent deposit, which comes with a fee of £999.
Those who buy with a 5 per cent deposit can get a 5.15 per cent rate with a £999 fee or a 5.19 per cent rate with no fee.
To apply, aspiring homeowners must use a mortgage broker; They cannot go directly to the building society.
Richard Fearon, chief executive of Leeds Building Society, said: “We are proud to launch Income Plus to put home ownership within reach of more people and help overcome two of the biggest barriers facing potential homeowners – income being outweighed by house prices and the difficulty of saving a large deposit.
“By combining a higher loan-to-income ratio with improved assessments of how much borrowers can afford, we can lend an average of up to £66,000 more and help people get closer to putting down roots in their community by buying their own home.”
David O’Leary, chief executive of the Home Builders Federation, also welcomed the new products and said an increase in demand from first-time buyers will only be a good thing for housebuilding.
He said: ‘Lack of adequate mortgage finance is a key barrier for many households who might otherwise take their first steps on the property ladder and this suppression of effective demand for new homes is holding back housing delivery.
“If we are to get any closer to meeting the Government’s ambitious housing supply targets, it will be essential for lenders to step up and support first-time buyers.”
Where else can first-time buyers get larger mortgages?
Leeds Building Society is not alone in offering first-time buyers the chance to borrow more than the standard 4.5 times income.
In September, Halifax announced it would make £2bn available to first-time buyers who needed to borrow up to 5.5 times their annual income.
To be eligible for what Halifax calls its “first-time buyer boost”, buyers need a total household income of £50,000 or more, which will need to come from employment. Therefore, this is a little more restrictive than what Leeds offers.
Halifax also needs first-time buyers to purchase a property with a deposit of at least 10 per cent to be eligible for the high borrowing multiples.
Also in September, Nationwide became the first major lender to offer first-time buyers the chance to borrow six times their income on mortgages covering up to 95 per cent of a property’s value.
Nationwide’s “help” products mean a first-time buying couple with a joint income of £50,000 could borrow up to £300,000, compared to £225,000 with standard income multiples, an increase of £75,000. That assumes a five per cent deposit and no other costs that affect affordability.
April Mortgages, which launched its first products in April this year, will lend up to six times its annual income to eligible first-time buyers, house movers and remortgaging.
It applies to both individual and joint mortgage applications. This means that two people who jointly earn £50,000 could borrow up to £300,000.
Another relatively new lender, Perenna, also offers up to six times borrowers’ income, subject to them meeting certain criteria.
To obtain any of these mortgages, borrowers will also need to pass the lender’s credit checks.
Rachel Springall, finance expert at Moneyfacts, said: “Increasing a deposit is a key issue for buyers facing a dwindling stock of affordable homes, which will take time to improve.”
“Product innovation or improvement should be celebrated and supporting new buyers will be key to keeping the mortgage market moving.”
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