Nationwide has given a boost to would-be first-time buyers on low incomes by reducing the minimum earnings required for its Helping Hand mortgage. The minimum income has been lowered from £40,000 back down to £35,000.
The building society had increased it to £40,000 back in January this year, so the decrease takes it back down to its previous level. It means first-time buyers on a lower salary can will be able to apply for the Helping Hand mortgage, subject to affordability checks. For joint applicants, the minimum combined income will remain the same at £55,000.
Helping Hand allows you to borrow of up to six times income when taking a five or ten-year fixed rate up to 95% Loan-to-Value (LTV). The standard amount most lenders will let you borrow is 4.5 times your income. First-time buyers also receive £500 cashback when they complete their mortgage with Nationwide.
Henry Jordan, Nationwide’s Director of Home, said: “We continue to do all we can to put first-time buyers first and aim to set our Helping Hand minimum income requirements at levels that give it the widest appeal. Helping Hand has proven extremely popular with prospective homeowners, especially since we extended it to six times income, and we continue to provide as much support as possible, whilst remaining within the high loan-to-income lending regulations.”
It comes after Santander became the first major bank to reduce mortgage affordability rates, allowing people to to borrow more. The lender has reduced the stress-test rates borrowers are checked against, which looks at whether they can afford to continue to pay their mortgage if interest rates rise.
Santander used to test if borrowers can afford a rate that is about one percentage point above its standard variable rate (SVR) of 6.75% – but this has now been reduced to between 6% and 7%. Santander says this means someone applying for a residential mortgage can now borrow between £10,000 to £35,000 more, depending on their individual circumstances.
The Financial Conduct Authority (FCA) has announced it is looking into simplifying mortgage rules, which could help struggling first-time buyers finally get on the property ladder. Mortgage lending rules were toughened in 2015 after the 2008 financial crisis. FCA chief executive Nikhil Rathi said the regulator would: “Begin simplifying responsible lending and advice rules for mortgages, supporting home ownership and opening a discussion on the balance between access to lending and levels of defaults.”
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If you have a tracker mortgage, it means your deal and monthly repayments move in line with the Bank of England base rate. A tracker mortgage usually tracks above the base rate. If you have a standard variable rate (SVR) mortgage then your deal can change at any time, though they do roughly tend to move in line with the base rate too.
SVRs are generally the most expensive type of mortgage. If you have a fixed rate mortgage, it means you have agreed to pay a fixed amount each month for a set period of time. You are normally moved to your lender’s SVR when your fixed deal ends. If your mortgage is due to expire, you should compare rates now and speak to a mortgage broker to look at your options.
Generally speaking, lenders let you secure a new deal around three months in advance. If rates come down, you may be able to cancel the deal you’ve agreed to and sign up to a cheaper rate – but check with your lender before signing up first to see if there are any fees.
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