Mortgage lenders' attempts to lure in first-time buyers have stepped up with the UK's biggest building society allowing some to borrow more.
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.
Nationwide borrowers will need an individual income of at least £30,000 a year, or at least £50,000 a year for a couple.
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 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.
The new borrowing limit will be available through the building society’s Helping Hand mortgage, which launched in 2021 to support first-time buyers by offering better lending options.
Nationwide said it would give potential homeowners a 33% uplift versus its standard lending at 4.5 times income.
The changes come amid a mortgage price war that has led to lenders jostling to cut their rates after the Bank of England’s 1 August interest rate cut and the expectation of more reductions to come.
In July, new fixed deals priced at below 4% went back on sale for the first time since February, and Nationwide’s changes include a range of fresh rate cuts that mean it will be the first major lender “for a long time” to offer a fixed deal priced at below 5% to first-time buyers borrowing 95% – that is, those who can only afford to put down a 5% deposit.
However, probably Nationwide’s most eye-catching move is its decision to increase the maximum sums it is willing to offer borrowers.
Traditionally the typical maximum for how much someone could borrow was 4.5 times their annual income, but in recent years a growing number of lenders have been offering higher income multiples. On 29 August, Lloyds Banking Group said its Lloyds and Halifax brands would now allow new buyers to take out loans worth up to 5.5 times their household annual income – up from 4.49 times. Several other leading lenders also go up to 5.5 times.
However, not many mortgage providers go up to six times income or more: one that does is Perenna, while in 2021, another lender, Habito, said it would let some homebuyers borrow up to seven times their income.
It said that from Tuesday it would give new buyers the option of borrowing up to six times their income when taking out a five- or 10-year fixed rate for up to 95% of the property’s value.
Nicholas Mendes, a mortgage technical manager at the broker John Charcol, said Nationwide’s move was “a gamechanger for first-time buyers” that would “deliver a powerful boost” towards tackling the significant affordability issues that had locked many out of home ownership.
David Stirling, an adviser at Mint Mortgages & Protection, said: “These are significant improvements … potentially increasing borrowing availability by up to 33%.”
Helping Hand has helped about 40,000 people on to the property ladder since it was launched three years ago, said Debbie Crosbie, Nationwide’s chief executive. “We want to do more and are boosting the scheme to six times income and increasing the maximum loan size. This, alongside our most recent rate cuts, further strengthens our market-leading position.”
Mortgage brokers have also welcomed the enhanced Helping Hand mortgage as a much-needed addition to the first-time buyer market.
Nicholas Mendes, mortgage technical manager at John Charcol, described Nationwide’s new borrowing limit as a ‘gamechanger’ for first-time buyers and one which will ‘deliver a powerful boost to help more people step onto the property ladder’.
“With the introduction of a groundbreaking offer that allows first-time buyers to borrow up to six times their income, Nationwide is truly putting ‘first-time buyers first’ and addressing the significant affordability issues many face today,” he said.
He added: “This increased borrowing power can make all the difference for aspiring homeowners, especially in a challenging market where property prices often feel out of reach.
“By providing this additional financial flexibility, Nationwide is turning dreams of homeownership into reality for thousands who may have previously struggled to afford their first home.”
Matt Smith, Rightmove’s Mortgage Expert said: “This package of measures is an encouraging development in the first-time buyer market, as it directly addresses a major barrier that many face in being able to borrow enough to take that important first step on the housing ladder. It is likely to be particularly beneficial in areas such as London and the South East where house prices are higher, and currently the average asking price of a home is more than five times the average salary of two people.
“We’ve been highlighting affordability as a key issue facing first-time buyers this year and calling for innovations that help overcome these challenges in a responsible way. We welcome this move and hope this is the start of a new and accelerated wave of support for first-time buyers. The timing of this announcement will be welcomed by many first-time buyers, as we’re seeing a much more active housing market than at this time last year, with buyer demand increasing into the traditionally busy Autumn season.”
