First-time buyer affordability hurdle with ‘Helping Hand’ mortgage

Apr 21, 2021

Nationwide is launching a new mortgage which enables first-time buyers to borrow 5.5 times their salary up to 90% loan-to-value (LTV).

The ‘Helping Hand’ mortgage, which will be available on 26 April, applies to borrowers taking out a five or ten-year fixed rate deal with the building society.

Nationwide claims it is the first major high street lender to offer this increased maximum loan-to-income ratio to first-time buyers.

It hopes the new offering will support so-called ‘Generation Rent’ applicants who were struggling with affordability to gain their first step on the property ladder.

There will be £1 billion of lending available via Helping Hand in order to support more first-time buyers onto the property ladder.

By applying a lower stress rate and higher maximum loan-to-income ratio where applicants opt for one of the Society’s standard five or ten-year fixed rate products, Nationwide said it could provide an uplift in affordability of up to 20%. This would allow more people to buy their first property up to a maximum 90% LTV.

What’s more, the society said the change meant a first-time buyer couple with a joint income of £50,000 could now borrow up to £275,000 with Helping Hand, rather than the £225,000 they could obtain previously. This was assuming a 10% deposit and no other costs impacting affordability.

Henry Jordan, director of mortgages at Nationwide Building Society, said: “Nationwide was founded to help people into homes of their own and that remains the case as much today as it did 135 years ago. In the UK there are nearly five million private rented households, but many of these renters have dreams and aspirations of buying a home of their own.

“However, with household incomes rising at a slower rate than house prices, many first-time buyers are finding it increasingly hard to get onto the property ladder. Our new Helping Hand option supports borrowers in meeting the affordability requirements, making it easier for them to buy a home of their own.”

First-time buyers using Helping Hand for enhanced affordability will have access to the standard product range, with consistent product rates, fees and features. All first-time buyers benefit from £500 cashback on completion of their mortgage.

All applications will be subject to robust underwriting checks, including full assessment of credit score and additional credit commitments, to ensure the Society continues to lend responsibly.

In the last financial year, Nationwide helped one in six first-time buyers and has expanded its higher LTV lending to house purchasers and existing members moving home.

Article originally posted by Mortgage Finance Gazette

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