One major lender has loosened its criteria for people buying a home with a 5% deposit, providing a much-needed boost for cash-strapped first-time buyers.
Here, we explain how the deal works, and dig into the details of a new report on the main issues facing prospective buyers.
First-time buyers can borrow 6 times their salary
Nationwide is now allowing first-time buyers with a 5% deposit to borrow up to six times their annual income.
The new limit, which is the highest available from any mainstream lender, is part of Nationwide's ‘Helping Hand’ mortgage for first-time buyers, which was launched in 2021.
It means a couple buying their first home with a joint income of £50,000 could potentially borrow up to £300,000.
Most lenders limit borrowing to four-and-a-half times income, which would mean a couple earning £50,000 could only borrow £225,000.
Nationwide's Helping Hand deal previously allowed borrowing up to five-and-a-half times income, a figure matched by lenders including Lloyds Bank and Halifax.
Nationwide's mortgage comes with a minimum income requirement of £50,000 (joint applicants) or £30,000 (single applicants). It's not available to self-employed workers.
Find out moreMortgage rates remain high for first-time buyers
The mortgage market has started to improve for first-time buyers, but rates still remain a barrier for many people trying to buy a home.
Find out more:The challenges facing first-time buyers
The current conditions for buying a first home are some of the toughest faced 70 years, according to a recent report by the Building Societies Association (BSA).
New research by Moneybox found that 59% of first-time buyers think they’ve started saving for their first home too late.
One in 10 of those buying on their own said it would take 10 years to save for a deposit, while a third admitted the process of buying a house was a lot harder than they expected.
Millennials in particular are putting off other life events until they have bought their first home. The report found that 30% of women and 24% of men are choosing to delay having a child, or more children, until they are homeowners.
How much do you need to save for a mortgage?
Moneybox found that £46,000 was the average savings goal for those aspiring to buy their own home.
If you are able to save more, you can usually get lower rates by putting down a 10% deposit.
Finding the right mortgage deal
There are thousands of mortgages out there, so you’ll need to think about things like how long you would like to fix your rate, up-front fees, and early repayment charges if you move.
A mortgage broker can offer advice on all of these areas and more. A good broker will find you the right deal for your circumstances and take you through the application process.
You can choose a mortgage without advice, but always remember to shop around – it's unlikely your current banking provider will offer the best deal.
Find out more:How to buy your first home
Buying a house, and applying for a mortgage, can seem overwhelming, and it’s best to look at the process step-by-step.
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