Nationwide green lights ‘game changing’ 6x earnings FTB mortgages
In a bold move Nationwide will allow FTBs the largest income multiplier compared to its rivals, signalling a likely upturn in housing market activity.
Mortgages giant the Nationwide has revealed that it is allowing first-time buyers to borrow as much as six times their annual salaries in a move that is likely to give the housing market a substantial boost.
Figures from rival Yorkshire Building Society recently showed the number of first-time buyer numbers hit a ten-year low during 2023 amidst soaring mortgage rates and the cost-of-living crisis, so Nationwide’s first move in the market is expected to turn this around.
Knock-on effect
Nationwide’s change in criteria comes amidst increasing competition between lenders – just a few weeks earlier, Lloyds and Halifax had raised their borrowing ratios for FTBs to 5.5 times salary.
The long-term average income multiplier is around 4.5 so six time income is a significant change. It means first-time buyers can now borrow 33% more than they could a few months ago.
For the ‘average’ first-time buyer couple, who are typically in their mid thirties with incomes of circa £38, their buying budget will have increased in theory from £337,000 to £450,000.
Nicholas Mendes, mortgage broker at John Charcol, told the Guardian it was “a gamechanger for first-time buyers” and that it would “deliver a powerful boost towards tackling the significant affordability issues that had locked many out of home ownership”.
And David Stirling of Mint Mortgages & Protection added: “These are significant improvements.”
This is good but what we really need is a route to allow FTB’s to borrow 100% mortgages. They are absolutely fine if the lenders don’t overextend the buyers. Ask yourself this. If they are lending £250,000 to a buyer, what’s the difference if the price is £250,000 or £279,000? Still lending the same amount and the buyers still need to be good for the money! It was only that the lenders became greedy and didn’t carry out proper checks which caused the credit crunch. It was bad lending/banking NOT bad borrowing.