Nationwide becomes later lender to reduce affordability stress rates

Nationwide is adjusting its mortgage affordability calculation by reducing its stress rates by between 0.75 and 1.25 percentage points, helping applicants to borrow more – whether buying a first home, moving or remortgaging.

Applicants will be able to borrow, on average, £28,000 more from today, however in some remortgage cases customers could borrow up to £42,600 more.

Nationwide is reducing both its standard stress rate and the rate applied to eligible first-time buyers and home movers fixing their deal for at least five years.

The change will benefit all types of borrowers, including first-time buyers who, where eligible, can also benefit from Helping Hand, which enables borrowing up to six times their income, up to 95% LTV. 

The largest boost to the borrowing amount is expected on remortgages where there is no additional borrowing. These fall outside the flow limit and are therefore unlikely to be capped at 4.5 times income.

Nationwide has been able to make the change due to the recent rule clarification on stress rates by the FCA, which confirmed the option to stress affordability with reference to product rather than revert rates.

Nationwide continues to push for a review of the Bank of England’s Financial Policy Committee loan-to-income flow limit to unlock the full potential of the rule clarification.

Henry Jordan, Nationwide’s Director of Home, said: “Affordability remains a key challenge and this change, along with our well-established and popular Helping Hand proposition, shows we’re serious about tackling it. Whilst the FCA’s clarification on affordability stress rates could support increased levels of home ownership, the Bank of England’s flow limit dampens its potential impact.  That’s why Nationwide continues to call for a review of the 15 per cent limit, so that we, and other lenders, can help more people access the long-term benefits of home ownership.”

Last month, HSBC announced changes to mortgage affordability assessments, with the average increase in offers for first-time buyers at £39,000. The announcement followed Halifax, BM Solutions, Bank of Scotland and Lloyds Bank who all announced enhancements to mortgage affordability assessments.