Relatives fund half of first time buyer house deposits

11 April 2017

  • A third rely on the Bank of Mum and Dad to put down money for their home
  • One in seven think they can fund a deposit with a loan or credit card
  • More than half said their number one savings aim was to build enough for a deposit
  • Seven per cent even suggested they’d give up their partner if it helped them buy a house

More than half of first time buyers are dependent on family money to raise the deposit on a home of their own, new research from Nationwide Mortgages has revealed.

Almost a third (31%) said that they would be calling on the Bank of Mum and Dad, while eight per cent were reliant on other relatives such as grandparents, according to the research, which asked would-be and recent first time buyers about their home buying plans*. Another 15 per cent said that funds from an inheritance would be used for a deposit on a property.

There are also potentially damaging misconceptions about what can be used as a home deposit. While two thirds (63%) said they were active savers into savings accounts, with a quarter (26%) specifically identifying the Help to Buy ISA as their savings vehicle of choice, a significant proportion thought they could use a personal loan (10%) or credit cards (5%) to fund a deposit. This is despite the fact that unsecured borrowing for this purpose could potentially damage their chances of securing a mortgage.

Those questioned were, however, prepared to make sacrifices to achieve the home buying dream. When asked what they would give up in order to buy a home, more than half said they would give up nights out (55%) and restaurant meals (51%), although they were least likely to give up extra TV services and entertainment (28%).

However, seven per cent said they’d even consider giving up a partner or spouse if it meant they could get a foot on the housing ladder. This rose to 11 per cent of the 45-54 age group who would forego a relationship if it meant they could buy a home.

Raising a deposit clearly represents the biggest hurdle for first time buyers. Those surveyed identified their biggest home-buying challenge as being able to pull together enough for a deposit on a home (30%), with the price of the house (21%) and cost of the mortgage (14%) some way behind.

Nationwide recently launched the Family Deposit Mortgage range specifically designed to allow families to raise funds from their existing property to help another family member buy a home, including homeowners helping their children to take their first steps onto the property ladder.

Matt Smith, Nationwide’s Head of Product Management for Mortgages, said: “The research bears out what we know – that raising a deposit, particularly as a would-be first time buyer, is often the biggest barrier to owning a home, and that family support can be vital to enabling them to take those first steps.

“It’s also clear that while the majority know how important saving for a deposit on a home may be, very often it’s extremely difficult to achieve without family support. However, they should never rely on borrowing to fund their deposit, such as credit cards or personal loans.

“Our Family Deposit Mortgage range has been launched in recognition of customer demand for a flexible and accessible way to use the wealth tied up in people’s homes to help another family member. This Nationwide range will enable families to give mutual support to each other and provide new options for home ownership.”

Three quarters (72%) of those surveyed described themselves as savers. When it came to savings aims, the number one ambition was identified as building up enough for a deposit on a house (55%), followed by saving for a rainy day or a nest egg (40%) and saving up for holidays (38%).

The majority were buying with a partner (57%), but a quarter were going it alone, a figure that rises to a third in Wales and 30 per cent in Scotland. Buying with a friend was the option for five per cent, although in London, with average first time buyer property prices of £410,000, this rose to ten per cent.

Women were more likely to want to buy a first home with a spouse or partner (62% women against 50% men). They were also more likely to want to live close to family than men (40% versus 33%).

Both existing Nationwide mortgage members and those remortgaging to the Society from another lender can apply for the Family Deposit Mortgage to raise extra capital for a family member. The buyer receiving the funds must have their own mortgage with Nationwide, selected from any product in the standard mortgage range. All of the additional monies raised must be provided as a fully gifted deposit. Those gifting the deposit to the buyer can access up to a total mortgage borrowing of 80 per cent loan to value (LTV).

Notes to Editor:

*Research conducted for Nationwide Building Society by OnePoll of 2,000 first time buyers, defined at those who are considering buying their first home or have bought in the last five years. Research conducted between 15 March and 27 March 2017.  Survey information to add.

Family Deposit Mortgages:

Those eligible for the Family Deposit Mortgage are existing Nationwide customers taking out a further advance, customers looking to remortgage from another lender with capital raising, or those looking to take out a mortgage if they have no existing mortgage.

Customers who are eligible can borrow up to 80 per cent LTV, to help a family member onto or up the property ladder with Nationwide, subject to standard lending criteria and affordability requirements.

The Family Deposit Mortgage cannot be opened online.

All of the additional funds raised through the FDM product must be gifted towards the ‘Buyer’s’ Nationwide mortgage and cannot be loaned. They cannot be used for any other purposes.

The ‘Buyer’ can select any product from the standard mortgage range, subject to the usual criteria and affordability requirements. Transactions for the ‘Buyer’ and ‘Helper’ will be carried out separately.

Borrowing in Retirement (BIR) applicants are able to take out a FDM, and standard BIR eligibility criteria will apply. All mortgages are subject to eligibility criteria, underwriting and conditions.

About Nationwide

Nationwide is the world's largest building society as well as one of the largest savings providers and a top-three provider of mortgages in the UK. It is also a major provider of current accounts, credit cards, ISAs and personal loans. Nationwide has around 15 million customers.

Customers can manage their finances in a branch, via the mobile app, on the telephone, internet and post. The Society has around 18,000 employees. Nationwide's head office is in Swindon with administration centres based in Northampton, Bournemouth and Dunfermline. The Society also has a number of call centres across the UK.

Please note: If you are a customer looking for information on our products and services, please visit the main website.