Nationwide makes huge mortgage rule change- how it will affect you

The building society is the first to change its borrowing criteria to allow customers to borrow up to six times their salary in order to buy a house

Nationwide Building Society has made a significant alteration to its lending rules, a move that could potentially benefit first-time buyers. The company is the first to modify its borrowing criteria, allowing customers to borrow up to six times their salary for house purchases.

Traditionally, each firm has used its own wage multiplier, with the general guideline being that mortgage lenders will lend customers around 4 to 4.5 times their wage. This is tied to affordability, as it assumes a reasonable tie to your salary that will enable you to repay the money - preventing someone earning £20k from borrowing £1 million.

As of now, Nationwide is now lending up to six times an individual's salary. It has also reduced its mortgage rates, with its five-year fix reduced by 0.05 percentage points to 0.1 percentage points depending on your LTV (loan to value ratio).

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This means a five-year fix with a 10 percent deposit is now priced at 4.49 percent, a significant drop from the highs of 6-7 percent seen in recent years. Combined, these changes mean first-time buyers have a much better chance of stepping onto the property ladder, as they can borrow more at a lower rate.

For instance, a couple earning £34,000 each will have £68,000 to use for the calculation. If you take £60,000 at four times salary, it would allow you to borrow £272,000, but at 6 times, it would permit for £408,000 borrowed, reports the Express.

This makes a significant difference to what you can purchase when house prices are continually rising.