Nationwide’s New Mortgage Rules:

The ‘Stamp Duty Holiday’ certainly seems to have stimulated the housing market as planned. With Rightmove reporting that recent weeks have seen the highest number of agreed sales in a single month for a decade, Rishi Sunak can be suitably proud of his initiative in these uncertain times. But… (there’s always a but!) There has been some less desirable news that will impact first-time buyers (and by default, those wanting to help them out). Nationwide, the country’s second-biggest mortgage lender has amended the rules on gifting for deposits. This has effectively tightened the amount that family members can help pay towards a deposit for their dependents when they apply to take out a higher loan-to-value deal.

What are the new rules?

Nationwide’s new mortgage rules state that to secure a ‘first time buyer’ mortgage with a 10% deposit, the buyer must now prove that they have saved at least 75% themselves. While other lenders haven’t yet followed suit in implementing the rule, it could only be a matter of time. 

What do they mean for first-time buyers / those wanting to help?

Since the pandemic began, multiple housing indexes show that the proportion of first-time buyers has fallen as a proportion of the market share. Furthermore, mortgage brokers are indicating that first time buyers with a 10% or less deposit are seeing the number of mortgage deals available to them fall by half.  To put this into perspective, as of May this year, the average London house price was £486,000. Under Nationwide’s new mortgage rules, parents wishing to help first-time buyers can only contribute, at most, £12,150 towards the 10% deposit. This means that on an ‘average’ London property, those wanting to help first-time buyers can contribute no more than a quarter of the required £48,600 deposit.

The future?

Nationwide new mortgage rules to limit the extent to which families can help their relatives are slated to be temporary.  After the Covid outbreak, ahead of many other mortgage providers, Nationwide made a swift return to 90% loan-to-value lending. This means they offer mortgages to people whose deposit only accounts for 10% of the total value of the property.  Yet, as the long-term economic outlook is so unclear, the building society claims to have tightened rules to mitigate risk.  However, some commentators have pointed out that high rents mean that many first-time buyers who are financially stable enough to afford mortgage repayments are unable to save the full deposit amount. In many cases, mortgage repayments would be far cheaper than their current rent. As such, the new rules are construed as prohibitive for those in this situation.



As always, if you would like to speak to us about making financial gifts to your loved ones, or how best to help a first-time buyer with a mortgage, please do get in touch. You can reach us on 01243 767 469. Alternatively, you can email us from our contact page, and an adviser will be in touch.

Written by Alex Welsh

Alex is a Resolution-accredited, Chartered financial adviser. Having joined the firm in 2012, he has extensive knowledge of all areas of financial planning.