COVENTRY Building Society (BS) has increased the amount first-time buyers can borrow to up to 6.5 times income with brokers saying “it shows how keen lenders are to attract” new buyers – though it has been warned that it could overstretch some borrowers.
They are potentially reducing the deposit needed on an average-priced home in England from £69,173 to £12,273.
Under its new criteria, the lender will offer mortgages of up to 6.5 times income to qualifying first-time buyers. Applicants must earn at least £30,000 when applying alone or have a combined income of £50,000 when applying jointly, Coventry BS confirmed.
A single applicant earning the average UK salary could potentially borrow up to £255,190 – enough to purchase the average first-time buyer property in England, priced at £245,450, with a 5% deposit of £12,273.
Under the previous borrowing limit, the same applicant could have secured approximately £176,277. Buying the same property would therefore have required a £69,173 deposit, equivalent to more than 28% of its value.
The £56,900 difference would take almost 12 years to accumulate for someone saving £400 a month, rising to nearly 16 years for a buyer putting aside £300 each month.
Coventry has also expanded its support for new-build buyers. Mortgages are now available at up to 95% loan-to-value on new-build houses and 85% on new-build flats.
Matthew Carter, head of homes at Coventry Building Society, said: “Too many first-time buyers have done all the right things only to find homeownership still out of reach – and it’s often even more challenging for people buying alone. As house prices have risen, the gap between what a single income can borrow and the cost of a typical first home has become increasingly difficult to bridge.
“When borrowing power falls short, many aspiring homeowners are forced to put their plans on hold or rely on support from family. But homeownership shouldn’t depend on having access to the Bank of Mum and Dad, and it shouldn’t feel especially out of reach for those buying on their own.
“By increasing borrowing potential for eligible customers, we’re helping more people buy a home based on the strength of their own income. It could mean buyers will be in a position to purchase much sooner – turning homeownership from a distant aspiration into a more achievable goal.”
Attract
Aaron Strutt, Product and Communications Director at London-based Trinity Financial, said he is surprised this is being offered by Coventry.
He added: “This isn’t something I expected Coventry to start offering, but it shows how keen lenders are to attract more first-time buyers and make it easier to get a sufficiently large mortgage to buy the property they want. More banks and building societies are offering 5.5 and six times single and joint income mortgages, but most are not stretching to 6.5 times salary.
“Nationwide’s six times salary Helping Hand scheme has been incredibly popular, and other lenders clearly want their piece of this market. Most first-time buyers will not need to borrow the full 6.5 times salary, but they do need an income boost.
“HSBC and NatWest were probably the last big lenders to start offering up to 6.5 times salary, but applicants need to earn over £100,000 to qualify through HSBC and £150,000 via NatWest. For many first-time buyers the thought of borrowing up to 6.5 times salary is not that appealing, but they will do it if it means they can get on the property ladder.”
Stephen Perkins, Managing Director at Norwich-based Yellow Brick Mortgages, said this scheme could make a significant difference.
He added: “Coventry increasing its maximum loan-to-income to 6.5 times for eligible first-time buyers is another reminder of just how much borrowing capacity can vary between lenders. Two buyers with exactly the same income, deposit and circumstances can potentially be offered very different amounts depending on which lender assesses them. That makes comparing the market important before starting a property search.
“A buyer who assumes they can only borrow what one lender or an online calculator suggests could unnecessarily lower their budget or conclude they can’t buy at all. Higher income multiples won’t suit everyone and affordability checks still apply, but having more options could make a significant difference for some first-time buyers.”
Alarm bells
Jamie Alexander, Mortgage Director at Romsey-based Alexander Southwell Mortgages, said borrowers need to get professional advice.
He added: “6.5 times income for first-time buyers is a meaningful move from Coventry and a sign of just how competitive this end of the market has become. Nationwide’s Helping Hand scheme showed there was real appetite for higher income multiples and other lenders have been playing catch up ever since.
“The income thresholds here are worth noting though. You need to earn at least £30,000 as a sole applicant or £50,000 combined, and no self-employed applicants are eligible. So it will not help everyone, but for the right client it could make a genuine difference between buying and not buying.
“The broader point is one I make to clients regularly. What one lender will offer you and what another will offer you can be very different in identical circumstances. An online calculator or a single lender check does not give you the full picture. That is exactly where a broker earns their place.”
Samuel Mather-Holgate, Managing Director & IFA at Swindon-based Mather and Murray Financial, warned that this may overstretch some borrowers.
He added: “This should set alarm bells ringing. Helping first-time buyers is laudable, but stretching loans to 6.5 times income risks turning aspiration into financial overreach. At today’s prices, many buyers are already walking a tightrope between deposits, bills and mortgage repayments.
“Larger loans and high loan-to-value deals may open the door, but they can also leave households dangerously exposed if rates stay higher, wages stall or property prices dip. This sort of lending should be reserved for genuinely exceptional cases with rock-solid affordability, not treated as a new normal. Getting on the ladder is not a victory if the first rung snaps beneath you.”
