NatWest Expands Mortgage Limits for High Earners
NatWest has made a significant change to its mortgage lending policy, allowing high earners to borrow up to 6.5 times their salary. This move is aimed at couples who jointly earn £150,000 or more, provided they can offer a deposit of at least 25 per cent. As a result, such couples could now be eligible for a mortgage of up to £975,000.
This is a notable shift from the typical industry standard, which often limits loans to 4.5 times the borrower’s salary. For a couple earning £150,000, this would have meant a maximum loan of £675,000. Previously, NatWest had set its limit at 6 times salary, allowing a maximum of £900,000. The new policy makes NatWest more flexible than most lenders in the market.
The relaxed lending criteria apply to both home movers and first-time buyers. However, similar changes have been seen elsewhere. HSBC, for instance, introduced a 6.5 loan-to-income mortgage last year, but this is only available to its Premier bank account customers. To qualify for Premier banking, individuals need an annual income of £100,000 or more, or have £100,000 in savings or investments with HSBC.
Other Lenders Offering Big Mortgages
Several other lenders also offer higher mortgage limits under certain conditions. Nationwide and Barclays will lend up to six times annual income in specific cases, while Halifax, Santander, and TSB allow up to 5.5 times. There are also some lesser-known lenders that go even further than NatWest.
April Mortgages, for example, offers up to seven times someone's income, but this requires borrowers to take a longer fixed term of between 10 and 15 years. Applicants must have an annual income of at least £50,000 and a minimum deposit of 15 per cent. Teachers Building Society also provides mortgages up to seven times annual income for those working in education.
Expert Opinions on the Policy Change
Aaron Strutt, a mortgage broker at Trinity Financial, noted that many potential borrowers are still struggling to buy the properties they want. He pointed out that affordability remains a major issue in the mortgage and property markets, and NatWest’s move is a step in the right direction, albeit mainly for higher earners.
“This policy change means they are more generous than virtually all of the other banks and building societies,” he said.
However, the question remains: will people apply for it? With mortgage rates currently high, there may be little appetite for taking on larger loans that could lead to higher monthly payments.
Consider a couple earning £150,000 a year who opt for the maximum £975,000 loan to buy a £1.3 million 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.
If each individual earns £75,000, their take-home pay after tax would be £54,061, leaving 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 cover bills, food, childcare, savings, and pensions.
It’s also important to note that a couple earning a combined £150,000 would likely need to have minimal credit card debt or loans and a clear credit history to qualify for the full £975,000. Any cars on finance may also reduce the maximum loan size.
Mixed Reactions from Industry Experts
Sarah Fox-Clinch, director at Bristol-based broker Fox Davidson, sees the move as a positive step. She believes that high-earning professionals have long been pushed towards private banks and specialist lenders. “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,” she said.
On the other hand, Riz Malik, an independent financial adviser at Southend-on-Sea-based R3 Wealth, argues that larger loans may not make a significant difference to home buyers. He points to stamp duty as the critical issue in the UK property market.
Currently, someone buying a £1.3 million home, whether a first-time buyer or home mover, will have to pay £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 said. “That decision needs to come from the Government, and their attention seems to be diverted elsewhere at present.”
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