End of the Bank of Mum and Dad? Nationwide tell first time-buyers to prove they SAVED 75% of deposit themselves
- Nationwide will crack down on first-time buyers relying heavily on their parents
- Buyers need to prove at least 75 per cent of mortgage money is from own saving
- Survey by Savills revealed 40 per cent of first-time home buyers had assistance
Nationwide has announced that first-time home buyers will now need to prove at least 75 per cent of the money they put down for a mortgage has come from their own savings.
The building society, which is ranked the UK’s second-biggest mortgage lender, will restrict the generous contributions made by the so-called Bank of Mum and Dad and will ask buyers to provide a sizeable deposit from their own savings.
The move comes just months after Nationwide mortgage customers were told they will now need a minimum of 15 per cent deposits to stop them from slipping into negative equity if house prices plummet.
Its latest crack down, which come amid the coronavirus pandemic, will now disappoint those who would have relied on their parents to get their foot on the property ladder.
Nationwide, the UK’s second-biggest mortgage lender, will restrict the contributions made by the so-called Bank of Mum and Dad. (Stock image)
Sources told The Sunday Times that the mortgage lender now wanted first-time property buyers to provide evidence that they had set aside their own savings and are not relying heavily on their parents.
It comes as a survey by the estate agents Savills this week revealed that 40 per cent of all mortgaged first-time home buyers had assistance from family to secure their purchase of a property last year.
Figures showed that the Bank of Mum and Dad totalled £5 billion in 2019 and was important in helping buyers enter the property market.
However Savills have since predicted that contributions from the Bank of Mum and Dad will decrease this year due to lower market activity as a result of the coronavirus pandemic.
In June, the building society told its mortgage customers that they will now need a minimum of 15 per cent deposits in a bid to to stop them from slipping into negative equity if house prices plummet.
The step from Britain’s biggest building society, which it described as ‘prudent’, applies to house purchase loans as well as re-mortgages.
The move comes after the building society told its mortgage customers that they will now need a minimum of 15 per cent deposits to to stop them from slipping into negative equity if house prices plummet. Pictured: A Nationwide branch in London
It came as a particular blow to first-time buyers, who often have only small amounts saved to get onto the property ladder and who have become used to a wide availability of low deposit deals in recent years.
This group could previously borrow up to 95 per cent LTV (loan-to-value) from Nationwide Building Society, depending on how they applied.
However, existing mortgage customers will still be able to obtain loans at up to 95% LTV from Nationwide.
Nationwide said the change, which is due to ‘these unprecedented times and an uncertain mortgage market’, would take place from June 18.
Customers who already have a mortgage with Nationwide will be able to switch to a new mortgage deal regardless of their LTV – providing there is no increase in the loan-to-value.
Applications from existing mortgage customers moving home that are above 85% LTV will also be considered on a ‘like-for-like’ LTV basis, Nationwide said.
The Society said that as a responsible lender, it needed to ensure borrowers could afford mortgage payments and are, as much as possible, protected against the potential for negative equity, should house prices decrease.
Negative equity occurs when someone owes more on their home than its value.
MailOnline had contacted Nationwide for comment.