Nationwide has lowered its mortgage stress test rates, enabling borrowers to increase their borrowing capacity. This change offers a notable boost for first-time buyers and home movers, helping to address ongoing affordability challenges in the housing market.
The adjustment to the lender’s affordability calculations reduces stress rates by between 0.75 and 1.25 percentage points. According to Nationwide, this means borrowers can typically borrow around £28,000 more, reflecting a significant shift amid rising interest rates and tighter lending criteria.
Reducing Stress Tests to Improve Mortgage Affordability
Mortgage stress tests assess whether borrowers can afford repayments if interest rates rise, typically setting affordability thresholds above the lender’s standard variable rate (SVR). Nationwide’s recent move to reduce these stress rates lowers the hurdle for mortgage approval, allowing borrowers to qualify for larger loans.
The lender reports that first-time buyers benefit substantially, especially those using the Helping Hand mortgage scheme, which permits borrowing up to six times their income.
For example, a first-time buyer earning £55,000 could see their borrowing limit rise from £304,200 to £330,000, according to Nationwide’s estimates. Similarly, home movers with an income of £75,000 may borrow up to £336,800, up from £307,000.
Henry Jordan, Nationwide’s Director of Home, described the change as a response to the persistent challenge of affordability. He said, “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.”
Jordan also highlighted the impact of regulatory constraints, noting that the Bank of England’s flow limit restricts the full potential of these adjustments.
Broader Industry Trend and Regulatory Context
Nationwide’s revision follows similar adjustments by other major UK lenders. Santander was among the first to reduce stress test rates, enabling applicants to borrow between £10,000 and £35,000 more, depending on their circumstances.
HSBC also reported that 20,000 additional customers now qualify for mortgages, with first-time buyers seeing average borrowing increases of £39,000.
Lloyds Banking Group, including Halifax and Bank of Scotland, has adopted comparable reductions in affordability stress rates. This collective shift across the industry reflects a response to recent regulatory clarifications and an evolving economic environment marked by interest rate rises.
The changes come amid calls from lenders for a review of the Bank of England’s 15% flow limit, which caps the volume of mortgages that lenders can approve at higher multiples of income. Nationwide’s Jordan emphasised that adjusting this limit would help lenders support more borrowers and widen access to long-term home ownership.
