Nationwide is reducing both its standard stress rate and the rate applied to eligible first-time buyers and home movers fixing their deal for at least five years.

The change will benefit all types of borrowers, including first-time buyers who, where eligible, can also benefit from Helping Hand, which enables borrowing up to six times their income, up to 95 per cent loan-to-value.

The largest boost to the borrowing amount is expected on remortgages where there is no additional borrowing. These fall outside the flow limit and are therefore unlikely to be capped at 4.5 times income.

Nationwide has made this change following the FCA’s recent rule clarification on stress rates which confirmed the option to stress affordability with reference to product rather than revert rates.

According to Nationwide, applicants will be able to borrow, on average, £28,000 more following the adjustment.

Commenting on the changes Nationwide’s director of home Henry Jordan said: “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.

“Whilst 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 per cent limit, so that we, and other lenders, can help more people access the long-term benefits of home ownership.”

John Charcol mortgage technical manager Nick Mendes welcomed Nationwide’s decision to lower its affordability stress rates and pointed to similar shifts from other lenders in recent weeks.

“While this is undoubtedly a positive and practical step, the full benefit won’t be felt until wider lending rules are addressed. Like other major lenders, Nationwide is still subject to the Bank of England’s loan-to-income cap, which limits higher-LTI lending to just 15% of new loans. That restriction makes it harder to offer this support more widely.

“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.”