Move seen as positive step for affordability, though BoE cap limits full impact
Nationwide Building Society has lowered its mortgage stress testing rates by between 0.75 and 1.25 percentage points, allowing applicants to borrow more.
The change means average borrowers can now access an additional £28,000 in funds. Stress rates are being cut across the board, including for first-time buyers and home movers securing five-year or longer fixed-rate deals.
Nationwide said the adjustment aligns with its goal of easing access to the housing market, particularly for first-time buyers. Those eligible may also benefit from the society’s Helping Hand initiative, which supports lending up to six times income at up to 95% loan-to-value (LTV). The biggest gains, however, are likely to be seen on remortgages without additional borrowing, as these are not constrained by the standard 4.5 times income flow limit.
The move comes in response to recent guidance from the Financial Conduct Authority (FCA), which allows lenders to assess affordability using actual product rates rather than revert rates.
Other major lenders, such as HSBC and Halifax, have also revised their stress testing policies in recent weeks.
Despite the changes, the building society stressed it will continue to apply strict underwriting criteria to ensure responsible lending. The lender reiterated that while it supports greater affordability, it remains constrained by the Bank of England’s loan-to-income (LTI) flow limit. This cap restricts lending at or above 4.5 times income to 15% of a lender’s total qualifying mortgages. Nationwide has again urged the central bank to revisit this rule.
“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,” said Henry Jordan, Nationwide’s director of home.
“While the FCA’s clarification on affordability stress rates could support increased levels of home ownership, the Bank of England’s flow limit dampens its potential impact. That’s why Nationwide continues to call for a review of the 15% limit, so that we, and other lenders, can help more people access the long-term benefits of home ownership.”
According to Nicholas Mendes, mortgage expert at broker John Charcol, Nationwide’s decision to lower its affordability stress rates would enable many would-be buyers and remortgagers to borrow around £28,000 more.
“While this is undoubtedly a positive and practical step, the full benefit won’t be felt until wider lending rules, such as the Bank of England’s loan-to-income cap, are addressed,” Mendes said. “Even so, the move reinforces Nationwide’s leadership on affordability and reflects a clear commitment to helping more people take their next step on the property ladder.”
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