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23 Feb 2022

Nationwide to offer bigger 95% mortgages to first-time buyers

Buyers with 5% deposit could borrow five and a half times their income

Nationwide will now lend first-time buyers up to five and a half times their income when they take out a 95% mortgage.

The building society has extended its 'Helping Hand' mortgage to buyers with a 5% deposit, but you'll need to meet specific criteria to qualify.

Here, Which? analyses the pros and cons of Nationwide's new deal, and offers advice on first-time buyer mortgages and house prices.

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Nationwide offers bigger mortgages to first-time buyers

Nationwide's new deal allows first-time buyers to borrow up to five and a half times their annual income, a figure well in excess of the four and a half times available from most lenders. To qualify, joint applicants must earn at least £50,000 a year, while sole applicants must earn at least £31,000.*

At a time when house prices are rising, this could provide a significant boost to cash-strapped first-time buyers. Recent research by Mojo Mortgages found that borrowers need to raise anywhere between 2.3 times (Hull) and 7.5 times (Bath) their annual salary to buy a home in their area.

Nationwide's deal would theoretically allow a couple with combined earnings of £50,000 to borrow up to £275,000 - £50,000 more than they'd be able to get from most other banks.


*This article was updated on 2 March 2022 to reflect that sole applicants must earn a minimum of £31,000, not £50,000 as previously stated.


How does Nationwide's deal compare?

Nationwide's Helping Hand mortgage comes with an initial rate of 3.49% fixed for five years, and an up-front fee of £999. The deal is also available fee-free, albeit with a higher rate of 3.69%. The building society is also offering £500 cashback.

When we analysed how Nationwide's mortgage compared to the competition, we found that the promise of a bigger mortgage comes at a cost.

Data from Moneyfacts shows first-time buyers can get a 95% mortgage from Yorkshire Building Society with a market-leading rate of 2.79%, 0.7% cheaper than Nationwide's deal.

Yorkshire's mortgage allows applicants earning over £70,000 to borrow up to five times their annual income. Those with earnings below £70,000 can borrow 4.49 times their earnings.

The table below shows the cheapest five-year fixes currently available to borrowers with a 5% deposit and where the data is available, the maximum income multiple the lenders are willing to use:

LenderInitial rateRevert rateUp-front feeMaximum income multiple
Yorkshire Building Society2.79%4.49%£9954.49 (under £70,000 earnings) or 5 (over £70,000)
Leeds Building Society2.80%5.29%£9994.5
Clydesdale Bank2.83%4.49%£999Not stated
Barclays2.85%3.99%None4
Newcastle Building Society2.85%3.96%£999Not stated

Source: Moneyfacts, 21 February 2022.

Do other lenders offer higher income multiples?

The Bank of England places strict limits on the proportion of mortgages that lenders can approve at four and a half-times income or above, so deals like Nationwide's Helping Hand mortgage are uncommon.

The online broker Habito made headlines recently when it launched a new mortgage range at seven times annual income for borrowers with 10% deposits, albeit with the caveat that the interest rate would be fixed for the entire term of the loan (for example 25 years).

Some other lenders have previously offered higher income multiples or bigger loans to buyers working in specific professions or with high earnings, though these deals have become less common since the start of the pandemic.

Some of the UK's biggest banks and building societies don't state their maximum income multiples on their deals. If you're unsure about how much you might be able to borrow, it's worth taking advice from a whole-of-market mortgage broker, who can help you find a suitable lender.

Should you consider a Helping Hand mortgage?

As ever, there are pros and cons to this new mortgage deal.

First, the positives. For some first-time buyers, the ability to borrow more may be the difference between buying a home now or needing to wait longer.

In addition, Nationwide is one of the UK's most reputable lenders. It has been named a Which? Recommended Provider for mortgages eight years in a row, meaning it regularly combines competitive rates with excellent customer service.

On the other hand, Nationwide's deal is more expensive than many of its competitors, and you'll need to fix your rate for five years, meaning you'll have less flexibility to switch in the short term.

Borrowing a bigger sum also means higher monthly repayments, so you'll need to think carefully about whether you will be able to easily afford the additional cost.

What's happening to first-time buyer mortgages?

First-time buyers have seen their mortgage options increase significantly over the last 12 months, and there are now more than 200 fixed-rate deals available to buyers with small deposits.

Rates have shown no sign of rising despite the Bank of England twice increasing its base rate, but it's still the case that if you can scrape together a 10% deposit you can benefit from much lower rates.

Right now, the cheapest two-year fix at 90% loan-to-value is priced at 1.64%, compared to 2.34% for a 95% deal - a gap of 0.7%. The gap on a five-year fix is 0.65%.

Will house prices continue to rise?

House prices soared in 2021, in part due to the government temporarily cutting stamp duty.

Experts believe prices rises will begin to slow down as 2022 progresses. At the start of the year, the property portal Zoopla predicted price growth of 3% in 2022, while the estate agency Savills forecasted rises of 3.5%.

Unfortunately for first-time buyers, it's unlikely that house prices will fall anytime soon, as demand continues to outstrip the supply of properties coming on to the market.

Advice on buying a home in 2022

If you're hoping to get on to the property ladder this year, we're here to help.

We've got lots of great advice on everything from saving a deposit to applying for a mortgage. You can also learn all about the pros and cons of schemes such as Help to Buy and First Homes.

As a starting point, check out our recent story on the five things to consider before buying a home in 2022.