Britain’s largest building society has given mortgage lenders the go-ahead to lend more to first-time buyers, allowing some to borrow more money.
Nationwide said that from Tuesday new borrowers will be able to apply for a mortgage of up to six times their income with just a 5 per cent deposit.
But it only applies to those who get a five- or 10-year mortgage.
With interest rates expected to fall, some people may only want short-term loans. Demand for loans is expected to be concentrated in London and southeast England.
Applicants will still need to meet relatively strict affordability criteria and will be assessed individually.
Competition among mortgage providers has intensified in recent months.
Brokers say lenders have been offering their best deals to new homebuyers rather than those taking out remortgages.
With relatively few buyers, suppliers are trying to grab a smaller piece of the pie.
First-time buyers are seen as a key battleground and Nationwide Insurance has been offering the largest so-called home loan-to-income multiples.
While the standard borrowing limit for first-time buyers is 4.5 times their income, Nationwide is allowing some buyers to borrow up to 5.5 times, and some other major lenders have followed suit.
Now, the threshold will be raised sixfold – but only for first-time buyers with an annual income of at least £30,000 for an individual, or £50,000 for a couple.
The company also plans to slightly reduce interest rates on some mortgages and increase maximum loan amounts.
David Hollingworth of broker L&C said: “For the right borrower this is a welcome move but it is not for everyone.”
Brokers say lenders are generally cautious about lending to high income multiples because such deals are usually only offered to high-income earners.
They said some smaller lenders, while typically charging higher interest rates, were offering six times as many payroll loans.
This move follows Building Society ReportThese include several associations including Nationwide, which reported that first-time buyers were facing the toughest conditions for buying a home in 70 years.
It called for a market rethink, including relaxing some lending restrictions when borrowers can only provide relatively small deposits.
