NatWest has boosted the amount high earners can borrow as a mortgage to 6.5 times their salary.
The high street lender will offer the deal to couples jointly earning £150,000 or more, as long as they are putting down a deposit of at least 25 per cent.
It means that a couple earning £150,000 between them could now borrow up to £975,000.
Often, banks cap the amount they will lend at 4.5 times the borrower’s salary. This would mean that the same couple would be limited to borrowing up to £675,000.
NatWest previously capped it at 6 times salary, so the couple could borrow £900,000.
NatWest’s more relaxed lending is available to both home movers and first-time buyers.
HSBC made a similar change last year, but its 6.5 loan-to-income mortgage is only available to its Premier bank account customers.
To join Premier banking, someone needs to have a yearly income of £100,000 or more, or have £100,000 in savings or investments with HSBC.
Bumper loan: NatWest is targeting higher earners keen to secure bigger mortgages
Where else can you get a big mortgage?
Nationwide and Barclays will lend to six times annual income in certain cases, while Halifax, Santander and TSB will allow up to 5.5 times.
There are also some lesser-known lenders that go even further than NatWest.
April Mortgages will lend up to seven times someone’s income, but this requires borrowers to take a longer fixed term of between 10 and 15 years. They will need an annual income of at least £50,000 and a minimum deposit of 15 per cent.
Teachers Building Society will also hand out mortgages up to seven times annual income to those working in education.
‘Many potential borrowers are still struggling to buy the properties they want,’ says Aaron Strutt of mortgage broker Trinity Financial.
‘Affordability is clearly a huge issue in the mortgage and property markets, and NatWest is trying to address this although at the moment mainly for higher earners.
‘This policy change means they are more generous than virtually all of the other banks and building societies.’
Will people apply for it?
At a time when mortgage rates are high, NatWest may find there is little appetite from people willing to make their monthly payments even higher by taking a bigger loan.
Take a couple earning £150,000 a year who opt to borrow the maximum £975,000 in order to buy a £1.3m home at 75 per cent loan-to-value.
They can currently secure a five-year fixed rate of 4.69 per cent with NatWest, with a £1,495 fee. This would mean paying £5,525 a month if they were on a 25-year repayment term.
In a scenario where both individuals were earning £75,000, that means their take home pay after tax would be £54,061. This would leave them with a combined £108,122 a year.
Their collective monthly income after tax and National Insurance contributions is £9,010.
After paying the mortgage, that leaves them with £3,485 a month, or £1,742.50 each, to put towards things like bills, food, childcare, savings and pensions.
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It’s also worth noting that a couple earning a combined £150,000 would probably have to have minimal credit cards or loans and a clear credit history to borrow the full £975,000. Any cars on finance may also reduce the maximum loan size.
‘This income stretch mortgage is large and borrowers will really need to think carefully before they take on such a big debt, even if they earn £150,000,’ says broker Aaron Strutt.
Sarah Fox-Clinch, director at Bristol-based broker Fox Davidson, thinks it’s a positive step, however.
‘For too long, high-earning professionals have been pushed towards private banks and specialist lenders by default.
‘High earners are good quality, low loan-to-value borrowers, and lifting the income multiples is the simplest way for a lender to grow its book. Updates like this are music to my ears.’
Riz Malik, independent financial adviser at Southend-on-Sea-based R3 Wealth says he doesn’t see larger loans making much difference to home buyers, arguing that stamp duty remains the critical issue.
At present someone buying a £1.3million home, whether a first-time buyer or home mover, will have to fork out £73,750 in stamp duty.
‘Is it enough to get Britain moving? Not with the stamp duty noose around the neck of the UK property market,’ he says.
‘That decision needs to come from the Government, and their attention seems to be diverted elsewhere at present.’
