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Limit put on deposits from Bank of Mum and Dad

A blow for first time buyers as Nationwide puts the brakes on the Bank of Mum and Dad

Bank of Mum and Dad

If you’re a first time buyer, times are tough. But this week, Britain’s second-biggest mortgage lender cracked down on buyers who need help from the Bank of Mum and Dad to come up with their deposit.

The biggest hurdle for first time buyers at the moment is the retraction of the 95% mortgage. According to an analysis by Moneyfacts.co.uk, there are currently just 20 mortgages available for buyers with the smallest deposits of 5%. This represents a 95% drop since the start of the coronavirus crisis.

The availability of mortgages up to 90% LTV and beyond also remains extremely limited.

This difficult climate meant the Bank of Mum and Dad was the obvious place for first time buyers to turn to boost their deposit and access a mortgage.

Nationwide’s cap

But Nationwide’s new rules mean first-time home buyers cannot rely on the “Bank of Mum and Dad” stumping up most of the cash for their deposit. The controversial new policy states that borrowers looking to get a mortgage that will cover 90 per cent of the cost of their home must prove that no more than a quarter of their deposit was gifted to them.

The rule does not apply to customers looking for deals at 85 per cent loan-to-value or lower.

With around 40 per cent of first-time buyers thought to have received financial help from family members last year, the change could affect significant numbers of potential homeowners.

Nationwide has not commented on the reasons behind the rule but it’s likely down to financial uncertainty as a result of the coronavirus pandemic. Ensuring homebuyers aren’t dependent on their parents for a deposit is, arguably, one way for Nationwide to restrict lending to those at lower risk of struggling to repay debt.

Commentators suspect this will have a significant impact on first time buyer numbers over coming months – even with the positive impact of the stamp duty holiday that will allow some first time buyers to wield a larger deposit.

What now for the Bank of Mum and Dad?

The good news is there are a number of other lenders that will let you use gifted deposits.

There are also a number of other schemes – from guarantor mortgages to linked accounts – that allow parents to give their children a leg up on the ladder.

Speak to our mortgage partners at London and Country today on 0800 073 2326 or use the online application to view your options


Leave a comment (11)* Required

  1. Grossly unfair of the Nationwide to do this. Times are hard for young people.

    I bank with the Nationwide but after this am seriously considering moving banks!

    Shame on you Nationwide!

    Comment by sharon bedford — August 11, 2020 @ 5:42 am

  2. So, yet another way of removing ALL competitors who are NOT wealthy speculators, professional landlords and the like!

    This will affect house prices, for sure, by reducing competition so that sellers have a smaller pool of buyers to choose from.

    We are preparing a whole generation for a lifetime of expensive rentals, lining the pockets of the rich!

    Comment by Gea Vox — August 10, 2020 @ 6:38 pm

  3. To be fair, complaining about the assessment not being about ability to pay is incorrect. If someone cannot raise 5% on their own, or with minimal help, it is far likelier they could in the long term be unable to afford repayments on the remaining 95%.

    Comment by Saxon — August 10, 2020 @ 10:22 am

  4. As someone who got a gift from my parents to boost my deposit this is mad. My parents wanted to help and were fortunate enough to be able to. My solicitor had them sign a document stating it was a gift that didn’t need to be paid back. Surely the main thing is being able to afford the monthly repayments? As the parents aren’t responsible for those and my parents income didn’t factor into the mortgage decision.

    Comment by Emma — August 10, 2020 @ 10:10 am

  5. Please could you explain how gift tax comes into play when parents give a child money to buy a house.

    Comment by Dee — August 7, 2020 @ 2:05 pm

  6. What difference does the source of the deposit make if the lender does due diligence on the ability to pay the mortgage? The Nationwide claims to be “on your side”: with “helpers” like that, who needs enemies?
    Does this ban also relate to C.E.O’s Mr Garner’s and other Directors’ families or do they make sure, by one means or another, that it is not needed?

    Comment by Mak — August 7, 2020 @ 10:19 am

  7. A pity that property was ever allowed to up in price

    Comment by P Johnson — August 6, 2020 @ 11:19 pm

  8. Thought about it some more, absolutely incensed.

    This is nothing to do with risk, it purely limits the size of deposit and the ability to get a more attractive mortgage interest rate. So mortgage costs more an lines Nationwide’s pockets.
    Yes I know that the interest is partially to cover risk for lender, but most of risk relates to the loan to value ratio. They can cover the rest simply by the affordability check against the repayments, that is what they need to be sure of irrespective of where the deposit comes from.

    Comment by M Guild — August 6, 2020 @ 10:16 pm

  9. Absolutely rriiddiiccuulloouuss . The previous comments sum it up fully.

    SOUNDS LIKE WE NEED ANOTHER RULE IN RESPONSE, BOYCOTT NATIONWIDE FOR MORTGAGES.

    Comment by M Guild — August 6, 2020 @ 10:06 pm

  10. Unbelievable. Who the hell do they think they are. It’s none of their dam business where the deposit comes from. If the borrower can afford the repayments (and there are already sufficient checks on this) then that’s all the lender needs to know.
    It’s hard enough for first time buyers without this nanny attitude. I hope nannywide lose loads of business over this.

    Comment by Dave — August 6, 2020 @ 7:13 pm

  11. Hi, I am a firsttime buyer and thinking to take out a mortgage as the rent i pay is more than paying for a mortgage.

    Comment by Aldrin Maminta — August 6, 2020 @ 1:05 pm

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