Nationwide targets wealthy buyers amid fears of mortgage chaos

BRITAIN’S biggest building society will lend wealthy homebuyers up to £5m, in a pivot to the rich amid concerns about how less well-off homeowners will cope with the cost of living crisis.

Nationwide is to offer borrowers who earn more than £100,000 per year a mortgage of up to five-and-a-half times their annual income, up from a previous limit of 4.49 times.

The building society has also increased its maximum loan size and relaxed lending limits, in some cases giving borrowers access to more than double the mortgage they could borrow previously.

Would-be buyers with a 25pc deposit can now borrow up to £5m with the rate fixed for five years, up from a £2m cap in place until now.

Nationwide’s Henry Jordan said the need for larger loans had grown due to soaring house prices. He added that the changes brought in by the building society were “in line with other lenders” and increased options for borrowers.

It follows similar moves by highstreet banks HSBC and Halifax in the past year.

Chris Sykes, of mortgage broker Private Finance, said Nationwide’s move was “significant”. Lenders are pivoting to the top end of the market as concerns grow about how the property market and mortgage borrowers will fare during the cost of living crisis and rising interest rates.

“Those applying for bigger loans above £1.5m can generally afford it and aren’t stretching themselves to get there, so they are less risky and a good business move for Nationwide,” Mr Sykes said.

“Because of changes to affordability calculators in light of the cost of living crisis, a fair amount of borrowers will be borrowing less and this gives lenders flexibility to offer more loans at higher income multiples to bigger earners.”

Those with a 20pc or 15pc deposit can borrow up to £1.5m, an increase of £500,000 and £750,000 respectively.

Nationwide has increased its maxi- mum loan size for borrowers with a 10pc deposit by £250,000 to £750,000. For those with just a 5pc deposit, the maximum borrow will remain at £500,000.

Mr Sykes added: “A lot of banks cap lending at £1m for anyone with a 15pc deposit. But Nationwide has probably solely applied it to five-year fixed deals because the length is enough to ride out any waves in the economy and make the lending less risky.”

The relaxed income rule will apply to first-time buyers, home movers and existing Nationwide customers, but will not be available to self-employed borrowers.

Borrowers with bigger deposits and lower earnings have struggled to meet affordability requirements in recent months due to soaring interest rates and huge increases in utility bills.

However, a recent policy change by the Bank of England has made it easier for first-time buyers – typically the most stretched borrowers – to borrow even more. This week Threadneedle Street removed rules requiring lenders to stress test borrowers at three percentage points above their standard variable rate (SVR) – a rule introduced in the wake of the financial crisis to protect homeowners from negative equity.

Instead, banks and building societies are now only required to test against SVR plus one percentage point, in line with regulations set by the Financial Conduct Authority, the City watchdog.

This would be equivalent to a typical first-time buyer borrowing an extra £28,000 on a mortgage, rising to an extra £49,000 in London where house prices are much higher.