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First Time Buyer

Nationwide lets first-time buyers borrow more…and with a smaller deposit

Paloma Kubiak
Written By:
Paloma Kubiak
Posted:
Updated:
15/02/2022

Nationwide has lowered the deposit requirement for its Helping Hand mortgage aimed at first-time buyers.

Nationwide has increased the maximum loan to value (LTV) for its Helping Hand mortgage to 95%, up from 90%, which will boost affordability for first-time buyers.

The mutual brought out its Helping Hand mortgage last year, at the time saying it would provide up to £1bn of lending via the scheme. It allows applicants to borrow up to 5.5x income, whereas the limit is usually 4.5x income.

The change comes into effect tomorrow and is available to eligible first-time buyers on both five and 10-year fixed rate terms.

Other benefits include £500 cashback and permitted overpayments of 10% without incurring early repayment charges.

The lender said first-time buyers opting for Helping Hand can access their standard product range, and that it would apply a lower stress rate and higher maximum loan to income (LTI) ratio where applicants opt for one of its standard five or 10-year fixed rate products.

It added this would give a 20% uplift in affordability, allowing more borrowers to purchase a property up to 95% LTV.

As an example, a first-time buyer couple with a joint income of £50,000 could borrow up to £275,000 via Helping Hand, compared to £225,000 on a conventional 95% LTV mortgage.

The product isn’t available for the self-employed however, and cannot be used in conjunction with affordable home ownership schemes such as Help to Buy, Deposit Unlock, shared ownership or Right to Buy.

Henry Jordan, director of mortgages at Nationwide Building Society, said the ability to borrow a sufficient amount on a mortgage, along with saving for a deposit, were significant hurdles to home ownership.

He said: “As a mutual, we were founded to support people into their first home and that remains at the heart of what we do. 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.”

The mutual said that the house price to earnings ratio had deteriorated over the last 10 years, going from 4.4 in 2011, to 5.6 in 2021. The average house price for a first-time buyer has increased by 54% over the same period to £214,638.