Nationwide has called on the government to review the industry’s loan-to-income (LTI) mortgage cap in a bid to help more first-time buyers onto the property ladder.
The mutual, like other lenders, is limited to lending no more than 15% of new loans to customers borrowing at, or above, 4.5 times their income.
But it says this cap restraints the amount it can responsibly lend to prospective homebuyers.
It points to its Helping Hand mortgage launched in April 2021, which accounted for 23% of Nationwide’s FTB mortgages last year.
The lender was able to boost lending from 5.5 times to six times income in late September through the product, which allows higher loan-to-income lending up to 95% loan-to-value.
The average loan size for FTBs grew to around £197,000 last year from £159,000 in 2020.
Nationwide points out that the average Helping Hand loan last year was 26% higher, at around £249,000.
In January 2025, Nationwide lifted the minimum income threshold for sole applicants for the loan to £40,000 from £35,000, citing the need to stay within regulatory LTI lending limits.
Nationwide director of home Henry Jordan says: “We believe it’s important to put FTBs first, given how tough it is to get on the housing ladder.
“Our enhanced Helping Hand mortgage is extremely popular with first-time buyers and we are committed to finding new ways to ease affordability.
“Increasing the loan-to-income lending cap would also enable lenders to support more first-time buyers.”
However, regulators fear that looser lending will lead to higher mortgage possessions, currently running at around 1,000 every three months.
In January, Bank of England governor Andrew Bailey told the Treasury Committee, “a public debate” is needed over the trade-off between higher repossessions and more people entering the mortgage market that lower stress tests may bring.
Bailey told MPs that the UK had come through a series of “major economic shocks over the last five years” such as the pandemic and the war in Ukraine.
But the country had not seen the rise in repossessions that homeowners saw in the 2008 financial crisis, partly because the mortgage lending rules regulators had put in place “had helped”.
Bank of England executive director Nathanaël Benjamin, also at the meeting, added that if stress tests were lowered without a rise in housebuilding that would only see “house prices go up”.
Also last month, the Financial Conduct Authority’s chief executive Rathi called on the government to lay out a level of mortgage defaults that are acceptable if lending rules are relaxed.
Rathi said: “We need to have a conversation about the risk appetite of parliament.”
The formal authority to lift loan-to-income limits rests with the Financial Policy Committee – chaired by Bailey on which Rathi also sits – who brought in this cap in 2014.
