From 26 April, first-time buyers will be allowed to stretch their salaries five and half times in order to reach the mortgage amount they need to buy a home with a ten per cent deposit.
To qualify for a Helping Hand mortgage, borrowers must pick a five or ten-year fixed rate mortgage from its standard range.
A lower stress rate is combined with the 5.5 times income multiple to increase the size of the loan offered by 20 per cent. The society would not disclose the stress rate but said it was a new rate that applied specifically to this range.
The change means a first-time buyer couple with a joint income of £50,000 can now borrow up to £275,000 with Helping Hand, rather than the £225,000 they could borrow previously, assuming a ten per cent deposit and no other costs impacting affordability.
Nationwide said borrowers will be subject to “robust underwriting checks”, which includes scrutiny of the amount of unsecured debt on the credit report and a full assessment of the credit score.
If necessary a lower income multiple will offered.
Self-employed borrowers are currently excluded from the Helping Hand deals and while the range has launched to first-time buyers only Nationwide may look to extend it to home movers in the future.
To manage volumes, a minimum single annual income of £31,000 or joint earnings of £50,000 apply, which are inline with average national salaries for the typical first-time buyer age group. The minimum salaries will be kept under review.
First-time buyers using Helping Hand for enhanced affordability will have access to the standard product range, with consistent product rates, fees and features. All first-time buyers benefit from £500 cashback on completion of their mortgage.
Nationwide has set aside £1bn of lending to fund the mortgage range.
Henry Jordan, director of mortgages at Nationwide Building Society, said: “In the UK there are nearly five million private rented households, but many of these renters have dreams and aspirations of buying a home of their own.
“However, with household incomes rising at a slower rate than house prices, many first-time buyers are finding it increasingly hard to get onto the property ladder. Our new Helping Hand option supports borrowers in meeting the affordability requirements, making it easier for them to buy a home of their own.”
Nationwide is currently offering 95 per cent LTV mortgages to its existing borrowers only. It is understood the society is reviewing a wider launch but no plans are yet underway.