Any potential customers who want to borrow more than 85 per cent of the property price will have to give a detailed account of their other regular outgoings.
Instead of using the income multiples to establish a maximum loan, Nationwide is introducing a scheme, for 85 per cent plus mortgages, where their lending is related to net disposable income.
The society's new fixed loan (7.25 per cent for two years) is available only up to a maximum of 90 per cent of the property price. A Nationwide spokesman said: 'If people wanted more than a 90 per cent mortgage, we would want to consider their individual circumstances.'
Cheltenham & Gloucester is the only other large building society to have formally introduced such tough restrictions. C&G will not lend more than 90 per cent of the property value, but it has become known as a niche player restricted to this part of the market.
Other societies believe that a recovery in the property market could be choked if other lenders followed the Nationwide example.
A spokesman for Woolwich Building Society reaffirmed the society's 95 per cent lending ceiling, and said it had no intention of reducing the limit: 'We have no intentions of doing that because it would have some effect on the housing market if we laid down certain constraints. Let alone the negative equity position.'
But Ian Darby of the independent mortgage brokers John Charcol believes that the property market is already being strangled by lending policies that are tougher than they ought to be.
He said: 'It's not going to help the market recover if you've got an unofficial credit crunch going on - which is what we have got. There are lots of very good mortgage applications that are being turned down by high street lending institutions. It is a hugely changed market.'
Many mortgage products are now being focused on borrowers who have a minimum 10 per cent deposit. On the typical first-time buyers' property costing pounds 53,760, buyers will have to find over pounds 5,000 for the deposit.
For the estimated one million households caught in the negative equity trap, a 90 per cent lending rule could mean that they have no prospect of selling their house and buying another. Not only must they make up the negative equity gap, but they would also require a 10 per cent deposit and a buyer with the same.
Many lenders are said to be demanding detailed evidence from their potential borrowers - poll tax and rates bills for three years to prove their addresses and evidence that any deposit has been saved not borrowed. Whether borrowers have been given a deposit by their parents, and if so, where this money came from.
The tough stance of the lenders is largely related to the attitude of their mortgage indemnity insurers, who themselves have been badly bitten by the repossessions crisis. Unlike most of the other main lenders, Nationwide has run its own self-insuring mortgage guarantee scheme.
The society says that in theory it will still make 100 per cent loans. But the new vetting procedures will be seen as a dramatic move towards smaller loans, setting a disturbing precedent in a deeply troubled property market.
For joint borrowers and those seeking remortgages, only 65 per cent of their net disposable income will be taken into account. To calucate net disposable income, Nationwide will apply a standard formula to the number of people in the household. On top of that will be added special payments, like hire purchase, car loan payments, outgoings on pension plans and maintenance provisions.
For loans below 85 per cent the old income ratios will continue to apply. Existing Nationwide borrowers will not have to meet the new stringent requirements for new loans below 90 per cent.
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