So, the latest offering from Nationwide is likely to come as a welcome development for those eager to get on the property ladder but worried their salary won’t stretch.
The building society has announced it will be offering its Helping Hand mortgage to borrowers who need to borrow at 95% loan-to-value (LTV) – in other words, those with a 5% deposit.
The Helping Hand product stands out because it enables first-time buyers to borrow up to 5.5 times their income. And, usually, most products only allow borrowing at 4.5 times income, unless they are specialist deals for those who are high earners.
You can find out more about how lenders calculate how much you can borrow here.
Nationwide already offers these terms, via the Helping Hand deal, to borrowers with a 10% deposit. But, by extending these terms to the 95% LTV deals, it will give those with a 5% deposit a bit more wiggle room when it comes to what they can afford.
David Hollingworth of broker, L&C Mortgages, explained: “First-time buyers typically face two major issues when attempting to take their first step on the ladder.
“High house prices mean there’s a need not only to build a substantial deposit, but also to be able to meet the affordability requirements for a mortgage.
“These challenges often combine, so extending the more flexible Helping Hand criteria to those with smaller deposits will provide a useful and targeted solution for a broader range of first-time buyers.”
Affordability boost
According to Nationwide, a couple earning £50,000 would be able to borrow a maximum of £275,000, using the Helping Hand mortgage, rather than the £225,000 for which they would be eligible on a standard 95% LTV deal. This is a 20% borrowing boost.
Henry Jordan, director of mortgages at Nationwide Building Society, said: “We know that raising even a 10% deposit can be tough for some, which is why we are extending Helping Hand to our 95% LTV range and, in doing so, helping more people get a home of their own.”
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