The lender is also now including 3% of the equity share loan as an outgoing in the client’s affordability calculation.
It says this change has been made to ensure that borrowers can afford to repay the mortgage in the long term, as previously the equity loan was not taken into account in the affordability calculation.
The equity loan, which is provided by a third party such as a housing association, must be interest free for the first five years to be accepted by Nationwide’s shared equity scheme.
The society says this change will have a minor impact on the amount of money it will lend.
In addition, Nationwide will no longer accept shared equity applications from non-EEA nationals without indefinite leave to remain in the UK.
A spokesman for Nationwide says: “All equity share loans will now need to be on a capital and repayment basis only. Our previous policy allowed interest-only applications, although the numbers of such applicants was very low.
“This reflects a more prudent approach we are taking, that will help borrowers in being able to buy out the equity loan element in the future.
“The interest-only change simply brings us back in line with the rest of the market, and with our existing policy to cap interest-only lending at 75% LTV.”