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Nationwide increases amount it will lend to first-time buyers & 95% mortgages what you need to know...

  • UK’s biggest building society says it will allow new buyers to take out loans worth up to 5.5 times their earnings.
  • On Monday, several big lenders launched 95% mortgages using the government’s guarantee scheme to back the deals.

One of the UK’s biggest building societies is increasing the sum it is willing to lend first-time buyers in a move it said would enable homeownership for many people who have been frozen out of the market.

This will allow new buyers to take out loans worth up to 5.5 times their earnings and adjust the stress tests it does on applicants when assessing mortgage affordability.

As a result of the changes, the maximum sum a buyer earning £50,000 can borrow will rise from £225,000 to £275,000. However, the larger loans will not be available to self-employed applicants.

Most lenders do not currently offer 5.5 times income borrowing, and those that do often set high minimum earnings for borrowers.

Borrowing on new builds will remain capped so that anyone buying a brand new house can borrow only up to 85% of its cost and anyone buying a flat can borrow up to 75%, although the new income multiples will apply if needed.

Henry Jordan, the director of mortgages at Nationwide, 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 5m 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 on to the property ladder.”

New 95% mortgage scheme launches

A new government-backed mortgage scheme to help people with 5% deposits get on to the housing ladder is available to lenders from 19th April 2021.

Chancellor Rishi Sunak confirmed in his Budget last month that the 95% mortgage scheme was designed to be a “policy that gives people who can’t afford a big deposit the chance to buy their own home.”

The scheme will help first time buyers or current homeowners secure a mortgage with just a 5% deposit to buy a house of up to £600,000 – providing an affordable route to home ownership for aspiring home-owners.

The government will offer lenders the guarantee they need to provide mortgages that cover the other 95%, subject to the usual affordability checks.

The scheme is now available from lenders on high streets across the country, with Lloyds, Santander, Barclays, HSBC and NatWest launching mortgages under the scheme from the 19th April 2021 and Virgin Money will follow next month.

The government has made clear its commitment to tackling inequality in the housing market and levelling up the country. Official statistics show more homes were delivered in 2020 than in any year since 1987.

In 2019 a pledge to build 300,000 new and attractive homes a year was announced with an investment of over £12 billion in affordable housing over the next 5 years – the largest investment in a decade.

Since 2010, more than 687,000 households have been helped into home ownership through government schemes, but when asked, 69% of private renters and 63% of those living at home who had looked into a mortgage said they cannot find many mortgages with a low deposit. Today’s new 95% mortgage scheme will now make it even more accessible to own a home.

Robert Fraser, the Managing Director at Fraser & Co has stated that “we have seen no sign of the sales market slowing down, with buyers still motivated by a combination of the Stamp Duty holiday, the easing of lockdown restrictions and the search for homes that match their revised housing requirements in light of the changes brought about by the coronavirus”. 

Check out all our available properties here.

Sources: Guardian & Gov.uk
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