Nationwide is reducing its mortgage affordability stress rates by between 0.75% and 1.25% from today, a move that will allow applicants to borrow more – whether they are first-time buyers, home movers or remortgaging.
The change follows updated guidance from the Financial Conduct Authority (FCA) that permits lenders to assess affordability using product rates instead of higher revert rates.
The new stress rates are expected to raise average borrowing capacity by around £28,000. The largest uplift is expected for remortgagers not seeking additional borrowing, as these are exempt from the Bank of England’s loan-to-income (LTI) cap of 4.5 times income.
Nationwide confirmed the new calculations will also apply to applicants using its Helping Hand scheme, which supports borrowing up to six times income at up to 95% loan-to-value (LTV). Illustrative examples show uplifts of £25,800 for a first-time buyer earning £55,000, and £42,600 for a remortgage applicant on £45,000.
Nicholas Mendes, mortgage technical manager at John Charcol, said: “Nationwide’s decision to lower its affordability stress rates by up to 1.25% is a welcome move for many would-be buyers and remortgagers.
“For some, it could mean borrowing around £28,000 more – a meaningful difference in today’s market. The change follows recent FCA guidance allowing lenders to assess affordability using product rates rather than higher revert rates. This gives a more realistic view of a borrower’s ability to repay, particularly for those opting for longer-term fixed deals.”
He added that while the move is a positive step, its full impact is limited by the Bank of England’s 15% flow limit on higher LTI lending. “That restriction makes it harder to offer this support more widely,” he said.
Nationwide’s director of home, Henry Jordan, echoed the call for regulatory reform: “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% limit, so that we, and other lenders, can help more people access the long-term benefits of home ownership.”
