Nationwide angers first-time buyers with ‘crazy’ change to mortgage scheme

NATIONWIDE has angered first-time buyers after making a “crazy” change to one of its mortgage schemes.

The lender’s Helping Hand mortgage helps aspiring homeowners borrow up to six times their income.

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This enables those on lower wages buy houses in pricier areas, such as London, with a smaller deposit.

The deal also allows customers to borrow 95% of the value of the property, meaning they would only need a deposit of 5%.

Buyers can then secure their home with one of Nationwide’s five or 10-year fixed-rate mortgages.

However, customers were left enraged this week when they discovered the lender had increased the minimum income threshold for solo buyers.

Prior to the change, applicants looking to buy a home by themselves could get approved for the Helping Hand scheme if they had a annual income of £35,000.

But this has now been increased to £40,000, up by £5,000.

The move has left people fuming, saying the increase will make it even harder for those wanting to buy a home.

One said: “Who the hell earns £40k as a single person these days, especially not many young people who will be first-time buyers.

“This is crazy, no wonder property market has stalled.”

“Helping hand for those who don’t need it,” another said.

Myron Jobson, senior personal finance analyst at interactive investor, said the move compounds “first-time buyers’ struggles by adding yet another hurdle to an already challenging market”.

The fiance expert said by raising the threshold it “shuts out” many potential buyers whose “incomes haven’t kept pace with the rising cost of living and property prices.”

“This change means you now have to earn more than the average salary for full-time employers to be eligible for the scheme.”

Nationwide also asks that two people looking to secure a Helping Hand mortgage together have a combined income of £55,000.

This has not been increased, though, and has remained the same since the scheme opened.

Neither single nor joint applicants can be self-employed, and they cannot be using an affordable home ownership scheme such as shared ownership or Right to Buy.

RELAXING LENDING RULES

A mixture of wage stagnation, rising daily costs and high house prices has meant first time buyers are struggling to get on the housing ladder.

But banks could soon be encouraged to offer more loans to people with smaller deposits and loosen limits on how much they can borrow.

Meanwhile, affordability checks which lenders use to see how much you can pay off each month could also take into account rental payments.

A major barrier for many buying a first home is the stringent checks that look at income to calculate this.

The potential shake up comes as part of plans by Chancellor Rachel Reeves to kickstart the economy.

One of the ideas reportedly floated is to allow banks to give more loans to buyers with smaller deposits.

Deposits are cash payments paid upfront by a person looking to buy a house and are worth a percentage of the property’s value.

Most first time buyers pay a 20% deposit on their first home. In December 2024 the average price of a house was £360,197, according to Rightmove.

That means wanna-be buyers would need to pay a deposit of £72,000 in order to be accepted for a mortgage.

FIRST TIME BUYERS COULD BORROW MORE

Regulators are also examining the rules which limit how much first time buyers can borrow.

Currently, mortgage lenders are only allowed to lend 15% of their loan book to people whose property is worth 4.5 times their annual salary.

So for example, if you earn £40,000 per year, you might be able to borrow around £180,000 for a mortgage.

These rules have historically been in place to ensure that people borrowing money for a house can afford interest rate increases on their mortgages.

That’s because the amount you pay on your mortgage can increase if interest rates rise.

If you have a variable or tracker rate, mortgages payments change when the base rate changes.

But if you have a fixed-rate mortgage, payments don’t change until the fixed-rate period ends.

Regulators are also understood to be altering these tests to look at someone’s track record of making rental payments rather than just their annual salary.

It often means first-time buyers are offered mortgages that have lower repayments than the rent they have been used to paying, despite being able to afford the higher amount.

In a response to the government, the Financial Conduct Authority said it was “already working to remove unnecessary regulation”.