Nationwide has announced that first-time buyers will now need to prove at least 75% of their deposit came from their own savings, rather than being gifted or lent it from the ‘Bank of Mum and Dad’.
The building society, which is the UK’s second biggest mortgage lender, has introduced the changes to ensure buyers are able to afford their mortgage.
The move comes just months after Nationwide announced they’d only lend to those with a deposit of at least 15%, in response to concerns that homeowners could find themselves in negative equity if house prices drop as a result of the pandemic.
With research from Savills showing that 40% of all mortgaged first-time-buyers had assistance from family members last year, this latest change will make it harder for many to buy their first home.
Can you still use the Bank of Mum and Dad to buy a house?
Although many lenders are tightening their criteria and this is making it harder for people to buy their first home, don’t let these changes stop you from trying. If you were in a good position to buy before Nationwide announced their plans to crack down on the ‘Bank of Mum and Dad’, there’s still hope for you yet.
Reassuringly, at the time of writing, there are plenty of other mortgage providers who are willing to lend to buyers who’ve received financial help from family members.
Increase your chances of getting a mortgage by using a mortgage broker
If you’re hoping to buy a home in the coming months, I’d recommend getting in touch with a mortgage broker for advice. They’ll take a good look at your finances to see what you can afford before comparing hundreds (or even thousands) of mortgage deals on your behalf.
They’ll highlight the most affordable deals for you while also using their insider knowledge to help you avoid lenders who are likely to reject your application.
For example, if you went to a mortgage broker and said your parents are paying 50% of your deposit for you, they’d probably cross Nationwide off their list and prioritise more understanding lenders instead.
Many mortgage lenders are free to use and they won’t charge you a penny for their services. They make money by charging fees to mortgage lenders instead.
When buying my apartment back in 2017, I used Habito as my mortgage broker and I wouldn’t hesitate to recommend them to you. They’re a fee-free broker and they operate entirely online. This is particularly ideal in the middle of a pandemic because you’ll want to be spending as much time as possible at home anyway! Instead of meeting in an office like you would ordinarily with a broker who works face-to-face, you’ll use Habito’s online chat service, email and phone calls, if you wish.
I’m a Habito affiliate which means if you create an account with this link, you and I will each earn a £50 John Lewis voucher on successful completion of your mortgage.