Nationwide calls time on the Bank of Mum & Dad.

[stockhausen]

Nationwide has decided that in order to get a mortgage with a 10% deposit, a prospective house buyer must now prove that they were given a maximum of 25% of that deposit by a parent or grandparent - they must show that the remaining 75% comes from their personal savings.

Whilst I applaud the idea of encouraging young people to save, I do wonder what reason Nationwide believes that parents have for saving money?

I have also heard suggestions that the Government wants banks to set negative interest rates so that you will have to "pay" a bank to keep your money. It seems that the Government's rationale is that everyone should dig into their savings in order to get the economy moving again.

I guess that the problem of paying for care home can be dealt with tomorrow - or at least, after the next election.

Didn't someone say something about imaginary money trees a while back?

edited:
On the basis of further study it does appear that Nationwide are (quite reasonably) doing this in order to ensure that people who may, with the help of their parents, have "scraped" together a deposit, are actually capable of saving and thus keeping up their repayments. In the current economic climate with the risk of many job losses I guess that that makes complete sense.


I am less convinced by the Government's apparent enthusiasm for a negative interest rate in order to encourage people to

Spend, Spend, Spend today because you needn't care about tomorrow!​

 

[Em3bbs]

The bankers, the tories, the bankers, the tories.

Oh it's a stockhausen thread.

 

[Rotty]

The bankers, the tories, the bankers, the tories.

Oh it's a stockhausen thread.

 

[MissChief]

Nationwide has decided that in order to get a mortgage with a 10% deposit, a prospective house buyer must now prove that they were given a maximum of 25% of that deposit by a parent or grandparent - they must show that the remaining 75% comes from their personal savings.

Whilst I applaud the idea of encouraging young people to save, I do wonder what reason Nationwide believes that parents have for saving money?

I have also heard suggestions that the Government wants banks to set negative interest rates so that you will have to "pay" a bank to keep your money. It seems that the Government's rationale is that everyone should dig into their savings in order to get the economy moving again.

I guess that the problem of paying for care home can be dealt with tomorrow - or at least, after the next election.

Didn't someone say something about imaginary money trees a while back?

There's no incentive to save these days with the pitiful interest rates while Credit card and loan rates are nudging over 10% for many people. That's even with good credit and if you can get one.

 

[Monkeynut]

To be honest, if Nationwide don't want people's business because they don't like the source, there are plenty of other banks who will lend and Nationwide will lose out.

 

[Quartz]

I have also heard suggestions that the Government wants banks to set negative interest rates so that you will have to "pay" a bank to keep your money.

Banks charging people for keeping their money used to be entirely normal.

 

[Eurofighter]

I'm guessing it's because if you didn't save up the deposit then you are not as financially sound as someone who has. But unless other banks also do it I dont think they are going to get very far unless they offer lower rates perhaps.

 

[Pawnless Endgame]

I'm with Nationwide, £270/month mortgage locked down for 10 years between 2016 and 2026. Didn't need to use the bank of Mum and Dad, although they did give me some furniture items when I moved in.

Meanwhile, the identical house next to mine (but with a much smaller garden) is rented @ £490/month. They're doing it wrong

 

[StriderX]

Well considering the folk most damaged economically now and for the foreseeable are people in their late-teens, twenties and early thirties... I'd say it was a risk the bank has decided it's no longer comfortable with.

 

[Surveyor]

Meanwhile, the identical house next to mine (but with a much smaller garden) is rented @ £490/month. They're doing it wrong

Maybe it's not them paying £490/month.

 

[jon86]

I'm sure that there are many ways around this rule. One might be for the parents to buy stock, gift it to a kid, and then the kid sells the stock to fund the deposit.

The bank would see a transfer in from a stock broker on the bank account statement, and the kid could just say that s/he sold some stock that s/he owned.

 

[=XDC=FluphyBunny]

To be honest, if Nationwide don't want people's business because they don't like the source, there are plenty of other banks who will lend and Nationwide will lose out.

This. It seems an odd business decision?

 

[Surveyor]

I'm sure that there are many ways around this rule. One might be for the parents to buy stock, gift it to a kid, and then the kid sells the stock to fund the deposit.

Some rudimentary questions would establish the source of the money.

 

[MissChief]

I'm with Nationwide, £270/month mortgage locked down for 10 years between 2016 and 2026. Didn't need to use the bank of Mum and Dad, although they did give me some furniture items when I moved in.

Meanwhile, the identical house next to mine (but with a much smaller garden) is rented @ £490/month. They're doing it wrong

Come on, you know the monthly payment isn't the issue, it's saving the deposit. I pay £650 a month in rent and live alone. A mortgage on my house would be somewhere in the region of £350-£400 a month. I just can't save for a deposit due to sky high rent. It's the same for hundreds of thousands of people across the UK and it's these people the BTL lot take advantage of.

 

[Werewolf]

To be honest, if Nationwide don't want people's business because they don't like the source, there are plenty of other banks who will lend and Nationwide will lose out.

Or they're looking ahead and seeing an issue with people who maybe got a large amount towards their deposit from their family to be able to get the mortgage,but may not be able to keep up with the repayments.

They may be remembering a few years back when people were getting loans outside their ability to pay, and are trying to prevent a problem before it gets bad, especially if they're expecting the economy to take a downturn and people to have less money.

 

[Werewolf]

I'm sure that there are many ways around this rule. One might be for the parents to buy stock, gift it to a kid, and then the kid sells the stock to fund the deposit.

The bank would see a transfer in from a stock broker on the bank account statement, and the kid could just say that s/he sold some stock that s/he owned.

You do that with the intent to deceive the bank and congratulations, you've committed fraud and if found out (which you can bet at least some will be), you're screwed for finance, insurance and a number of jobs that will not even consider someone who has a finance related conviction.

Depending on how thorough the bank was with the checks, they could easily ask for 5 years of your financial information.

 

[ianh]

My guess would been they've seen an unacceptable rise in the number of defaults caused by parents supplying the deposit to obtain the "child's" first mortgage but the "child" being unable to cope with the monthly payments so, as a private company, they've decided that the risk they take needs reducing and this is their choice on how to do that.

Either it'll work and reduce their risk or it'll fail and they'll lose more money from people looking at getting their mortgage elsewhere.

 

[Jokester]

Surely the source of the deposit is irrelevant. It’s the purchaser’s ability to make the monthly payment that is the important bit, or have Nationwide been assuming that by having a deposit that they’re somehow otherwise good for the mortgage repayment regardless of ongoing income?

Edit:
Or are the bank facing issues due to inheritance tax?

 

[weringo]

I presume its simply because some data shows that those who save for a deposit on average default less than those who don't. The bank aren't stupid and aren't turning down business for the sake of it.

 

[Psycho Sonny]

I'm with Nationwide, £270/month mortgage locked down for 10 years between 2016 and 2026. Didn't need to use the bank of Mum and Dad, although they did give me some furniture items when I moved in.

Meanwhile, the identical house next to mine (but with a much smaller garden) is rented @ £490/month. They're doing it wrong

If you did have to use the bank of mum and dad on a £270 per month mortgage then I'd have serious concerns with your finances tbh.