Mortgages at six times' income for first-time buyers

Mortgage lenders' attempts to lure in first-time buyers have stepped up with the UK's biggest building society allowing some to borrow more.

The Nationwide said that from Tuesday, new borrowers could request a mortgage up to six times their income with a 5% deposit.

But it would only be available for those taking out a five or 10-year fixed-rate deal.

With rates expected to fall, some may only want a loan with interest fixed for a shorter term. The uptake is expected to be concentrated in London and south east England.

Applicants will still have to meet relatively strict affordability criteria, which is assessed individually.

Lenders also face their own regulated controls on lending to riskier borrowers, brought in after the financial crisis of nearly 20 years ago which saw certain banks - which many accused of unnecessarily risky lending - being bailed out.

Competition

Competition between mortgage providers has intensified in recent months.

Brokers say that lenders have been offering the best deals to new, house-purchasing customers, rather than those who are remortgaging.

With relatively few buyers, providers are trying to get a piece of a small pie.

First-time buyers are seen as a key battleground, and the Nationwide has been offering among the largest so-called income multiple for home loans.

While the standard level of borrowing for first-time buyers is a loan of up to 4.5 times' income, the Nationwide has allowed some to borrow 5.5 times - a move followed by some other major providers.

Now, it will step that level up to six times - but only among first-time buyers with an individual income of at least £30,000 a year, or a couple earning at least £50,000 a year.

It is also planning to reduce some mortgage interest rates slightly, and increase the maximum total loan available.

"It is a welcome move for the right borrowers, but it is not going to work for everyone," said David Hollingworth, from broker L&C.

Brokers said lenders were generally wary when lending at high income multiples, with such deals usually only available to high earners.

Some smaller lenders offered six times' salary although they normally charged higher rates of interest, they said.

Broker Michelle Lawson, of Lawson Financial, said lenders were diversifying their offer to attract more business.

The move follows a report by the Building Societies Association, of which Nationwide is a member, which suggested first-time buyers were facing the toughest conditions in 70 years to buy a home.

It called for fresh thinking from the market, including easing some of the limits on lending when borrowers could only offer a relatively small deposit.

Ways to make your mortgage more affordable

• Make overpayments. If you still have some time on a low fixed-rate deal, you might be able to pay more now to save later.

• Move to an interest-only mortgage. It can keep your monthly payments affordable although you won't be paying off the debt accrued when purchasing your house.

• Extend the life of your mortgage. The typical mortgage term is 25 years, but 30 and even 40-year terms are now available.

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