New first-time purchaser mortgage permits borrowing as much as 5.5 occasions earnings

First-time buyers might be able to borrow up to £66,000 more on average thanks to a new mortgage on offer with Leeds Building Society.

Britain’s fifth-largest building society will allow some first-time buyers to get loans of up to 5.5 times their annual income, compared to the usual 4.5 times. 

However, they must meet certain criteria including a minimum household income of £40,000 to qualify for the product, known as ‘income plus’.   

The building society says the average first-time buyer could be able to borrow a maximum of £356,000 through income plus compared to £290,000 under its standard lending – a difference of £66,000. 

Single and joint borrowers, including those who are self-employed, will be able to apply, with loans covering up to 95 per cent of the property value.

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Boost: Aspiring homeowners with a minimum household income of £40,000 could be able to borrow up to 5.5 times their earnings with Leeds

Income plus mortgages are five-year fixed deals. Rates start from 4.4 per cent for those buying with at least a 25 per cent deposit, which comes with a £999 fee.

Those buying with a 5 per cent deposit can secure a 5.15 per cent rate with a £999 fee or a 5.19 per cent rate with no fee.

In order to apply, aspiring homeowners must use a mortgage broker – they can’t go directly to the building society.

Richard Fearon, chief executive of Leeds Building Society, said: ‘We’re proud to launch income plus to put homeownership within reach of more people and help overcome two of the main barriers facing would-be homeowners: earnings being outstripped by house prices and the difficulty of saving a large deposit.

‘By combining a higher loan to income with improved assessments of how much borrowers can afford, we can lend an average up to £66,000 more and help people get closer to putting down roots in their community by buying their own home.’

David O’Leary, executive director at Home Builders Federation also welcomed the new products and said that a boost in first-time buyer demand will only be a good thing for house building.

He said: ‘The lack of appropriate mortgage finance is a key barrier for many households who would otherwise be able to take their first steps on the housing ladder and this suppression of effective demand for new homes is holding back housing delivery.

‘If we are to come anywhere close to meeting the Government’s ambitious housing supply targets, lenders stepping up to the plate and supporting first-time buyers will be essential.’

Where else can first-time buyers get bigger mortgages? 

Leeds Building Society is not alone in offering first-time buyers the chance to borrow more than the standard 4.5 times income.

In September, Halifax announced it was making £2billion available for first-time buyers who needed to borrow up to 5.5 times their annual income.

To be eligible for what Halifax is calling its ‘first-time buyer boost,’ buyers need a total household income of £50,000 or more, which will need to come from employment. This is slightly more restrictive therefore than what Leeds is offering.

Halifax also needs first-time buyers to be purchasing a property with a deposit of at least 10 per cent to be eligible for the high borrowing multiples.

Also in September, Nationwide became the first major lender to offer first-time buyers the ability to borrow six times income on mortgages covering up to 95 per cent of a property’s value. 

Nationwide’s ‘helping hand’ products mean a first-time buyer couple with a joint income of £50,000 could borrow up to £300,000, compared to £225,000 with standard income multiples – an increase of £75,000. That assumes a five per cent deposit and no other costs impacting affordability.

April Mortgages, which launched its first products in April this year, will lend up to six times annual income to eligible first-time buyers, home movers and people remortgaging.

It applies to both individual and joint mortgage applications. This means that two people earning a combined £50,000 could potentially borrow up to £300,000.

Another relatively new lender, Perenna, also offers up to six times a borrowers’ income, subject to them meeting certain criteria. 

To get any of these mortgages, borrowers will also need to pass the lender’s credit checks. 

Rachel Springall, finance expert at Moneyfacts, said: ‘Stretching a deposit is a key issue for buyers who are faced with a dwindling stock of affordable housing, which will take time to improve. 

‘Product innovation or enhancement should be celebrated and support for new buyers will be integral to keep the mortgage market moving.’