Nationwide’s new method

Nationwide Building Society has stopped basing its lending on income multiples, meaning it is likely to lend less than it did before, mortgage brokers say.

Last week, the lender replaced its income multiplier system with a new approach that it claimed was more tailored to a borrower’s circumstances. The new calculation takes into account net disposable income, applies further deductions for household costs and uses a calculation that takes account of factors such as loan-to-value.

Nationwide said this new method could see it lending up to 4.5x income. But brokers said a large number of people would see their borrowing reduced to below the
4.1x income offered under its previous income multiplier system.

“It does appear that only someone with no debt, no dependants and a large deposit will be able to borrow the maximum
4.5x income,” said Nigel Bedford of largemortgage- loans.com. He said a person earning £40,000 with two dependants and a £50,000 deposit could have got a loan of £164,000 under the old system – now, they could obtain just £150,000.

If the amount of deposit doubled to £100,000, Nationwide would lend £169,000 – which is only a small increase.

“In a number of examples we’ve seen so far, it does seem that most borrowers can’t borrow as much,” said Ray Boulger of John Charcol. He said this could be an attempt by Nationwide to restrict how much it lends.

“In recent times, Nationwide hasn’t been one of the lenders with big income multiples but this change will not help borrowers in their typical customer base who will not have substantial deposits,” said Bedford.

A spokeswoman for Nationwide said: “We are now taking an even more personalised approach, which may mean that some are able to borrow slightly more while others will be offered slightly less. However, our modelling shows that the majority of our customers can borrow the same as before.”