The new system, which will be introduced from March 4, will take net disposable income, apply further deductions for household costs, and also apply a calculation that takes into account other factors such as LTV.
It will also scrap payment holidays and borrow back features on new Nationwide products. However, customers will still be able to overpay and underpay, extend the mortgage term to reduce payments if their repayment type is capital and interest and convert to interest only.
The lender is also renaming reservation fee to product fee, which, they say, is designed to help distinguish the fees when using product-sourcing systems.
A spokesman for Nationwide says: “We have always been a cautious lender where we assess what an individual can afford to repay and we are continuing to be prudent. Our calculation now takes an even more personalised approach to assessing the amount we will lend.”