Coventry Building Society offers first-time buyers mortgages up to 6.5 times salary

Coventry Building Society has significantly increased the amount some first-time buyers can borrow, with eligible applicants now potentially able to secure a mortgage of up to 6.5 times their income.

The move makes Coventry one of a relatively small number of mainstream lenders prepared to offer mortgages at this level and highlights the growing competition between banks and building societies to attract first-time buyers.

Coventry's enhanced income multiple is available on eligible residential purchases up to 95% loan-to-value (LTV), meaning buyers may potentially qualify with a deposit of just 5%.

Applicants need a minimum income of £30,000 for a sole application or a combined £50,000 for a joint application. As with all mortgages, the maximum amount available will depend on the lender's detailed affordability assessment, credit scoring, financial commitments and wider lending criteria.

How much could a first-time buyer borrow at 6.5 times salary?

A mortgage based on 6.5 times income can provide a substantial affordability boost compared with a more traditional four or 4.5 times salary calculation.

For example:

Source: 6.5 times salary mortgage borrowing examples. These figures are examples rather than guaranteed mortgage amounts. Lenders will also assess expenditure, debts, dependants, credit commitments, mortgage term and the size of the deposit.

Why has Coventry increased its first-time buyer income multiple?

Affordability remains one of the biggest obstacles facing first-time buyers, particularly in London and other areas where property prices remain high relative to earnings.

While some buyers can save a reasonable deposit, they may still find that the mortgage offered under a standard income calculation is not large enough to purchase the property they want.

Coventry says its enhanced borrowing is designed to help customers with sufficient income and affordability maximise their borrowing potential.

The society has also increased its lending limits on new-build properties. It will now lend up to 95% LTV on owner-occupied new-build houses and 85% LTV on owner-occupied new-build flats.

More mortgage lenders are offering higher income multiples

Coventry's decision is the latest sign that mortgage lenders are becoming increasingly flexible with affordability.

More banks and building societies now offer selected borrowers mortgages calculated at 5.5 or six times income, although products allowing 6.5 times salary remain relatively unusual.

Nationwide's Helping Hand scheme has proved particularly popular with first-time buyers. Eligible borrowers can potentially access up to six times income, including at up to 95% LTV on qualifying fixed rates.

Higher earners can also access enhanced borrowing through other lenders. HSBC, for example, currently publishes a maximum 6.5 times income multiple for qualifying HSBC Premier customers at up to 90% LTV.

NatWest has also increased its maximum loan-to-income multiple for higher-earning joint applicants. Customers with a joint income of at least £150,000 can potentially access 6.5 times income at 75% LTV or below, subject to affordability.

Aaron Strutt: Coventry's 6.5 times income mortgage is a surprising move

Aaron Strutt, Product Director at Trinity Financial, says: "This is not something I expected Coventry to start offering, but it shows just how keen lenders are to attract more first-time buyers and make it easier for them to secure a sufficiently large mortgage to buy the property they want.

"More banks and building societies are offering 5.5 and six times single and joint income mortgages, but most are still not stretching to 6.5 times salary. Nationwide's six times salary Helping Hand scheme has been incredibly popular, and other lenders clearly want their piece of this market.

"Most first-time buyers will not need to borrow the full 6.5 times salary, but many do need an affordability boost. For buyers struggling with the gap between their deposit, mortgage borrowing and the property price, these higher income multiples can make a significant difference.

"For many first-time buyers, the thought of borrowing up to 6.5 times salary is not particularly appealing, but some will consider it if it means they can finally get onto the property ladder. Policies like this can also mean first-time buyers are less reliant on the Bank of Mum and Dad to bridge the affordability gap."

What about self-employed first-time buyers?

One disappointing aspect of Coventry's enhanced 6.5 times income proposition is that it is not designed for self-employed borrowers.

Coventry is normally a lender Trinity Financial's brokers consider for sole traders and limited company directors, so this restriction may mean self-employed first-time buyers need to look elsewhere if they require a significant affordability boost.

There are other options. Halifax, for example, has enhanced first-time buyer affordability options which can be available to qualifying self-employed borrowers, subject to its affordability assessment and lending criteria.

The important point is that self-employed applicants should not assume the headline income multiple tells them which lender will provide the largest mortgage. Banks and building societies calculate self-employed income in very different ways, including using salary and dividends, net profit or an average of several years' accounts.

Do you have to borrow 6.5 times your salary?

No. 

A lender offering a maximum of 6.5 times income does not mean a first-time buyer should automatically borrow that amount.

For many applicants, borrowing five or 5.5 times income may provide enough money to purchase the property they want.

Higher borrowing also means larger monthly repayments and potentially more interest being paid over the mortgage term. Applicants should consider whether the repayments remain comfortable if their circumstances change or household expenditure rises.

The benefit of lenders increasing their maximum income multiples is primarily choice. It gives mortgage brokers more options when helping buyers whose income supports the mortgage payments but who cannot borrow enough under a conventional affordability calculation.

Can a mortgage broker help me borrow more?

Different lenders can produce dramatically different maximum loan amounts from exactly the same salary.

One bank might offer four or 4.5 times income, while another could potentially lend 5.5, six or even 6.5 times income to the same applicant depending on their circumstances.

There are also substantial differences in how lenders treat:

• Bonuses and commission
• Overtime
• Self-employed income
• Limited company profits
• Contractor income
• Existing loans and credit cards
• Childcare and school fees
• Student loans
• Pension contributions
• Longer mortgage terms

Trinity Financial's brokers compare affordability across banks, building societies and specialist mortgage lenders to establish how much applicants could potentially borrow and which lenders' criteria best suit their circumstances.

Call Trinity Financial on 020 7016 0790 to secure a fixed or tracker rate mortgage, book a consultation, or use our appointment calendar

The information contained within was correct at the time of publication but is subject to change. It is for general information purposes and is not advice.

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