Bad news for those who rely on the Bank of Mum and Dad
Nationwide are cracking down on mortgage deposits funded by ‘the bank of mum and dad’, implementing a new policy which requires first time buyers to prove at least 75 per cent of their deposit has come from their own savings.
The new measure comes as a result of financial uncertainties spawned from the coronavirus pandemic. As house prices have soared over the past decade, thousands of first time buyers have relied on financial support from their parents to get a foot on the ladder, while those without such a lifeline have become consigned to a life of renting.
The average house price in London is £475,000. First time buyers could now find themselves facing the task of raising £70,000 for a deposit, with their parents only allowed to contribute a quarter, which equates to £17,500.
Savills estate agents recently estimated that around 40% of first-time buyers seeking mortgages had family help last year, with parents contributing £5bn in house deposits.
Nationwide have already made restrictive changes to their mortgage deals, cutting back on low-deposit mortgages, reducing the maximum length of its loans to 25 years and restricting the types of properties they allow first timers to buy. Now, they will not even consider loans if applicants rely on their families for more than a quarter of the deposit.
