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Nationwide cracks down on Bank of Mum and Dad


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https://www.thetimes.co.uk/article/nationwide-cracks-down-on-deposits-from-bank-of-mum-and-dad-qgtgpsrt2

Buyers seeking lower-deposit mortgages will need to prove that at least three-quarters of the cash they put down has come from their own savings.

I think this will have a big effect on the market.

I heard Henry Pryor discussing this on LBC, and he said many buyers have been using the Bank Mum/Dad.

He said lenders are now nervous about the stability of mum/dad's future finances. 

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31 minutes ago, Postman said:

Very good. This will ensure genuine hard working ftbs don't get leap frogged by Tarquin with a trust fund

Sadly not. It only counts for low deposits. So Neveah with bomad might be more accurate description of who it hits.

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I had a viewing yesterday of a house that has suddenly come back on, already 30k below previous asking, I went in another 20k below that...will probably be rejected, but not worried. The reason it was back on was a broken chain, and the vendor is packed up ready to go...I suspect that most chains will collapsing at the bottom because of this kind of thing along with requirement for deposits of 15-20%. This, combined with unemployment etc is absolutely baking in falls of 15-20% over the next year.

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I'm not sure why NW care who makes up the deposit if it's effectively a gift and not subject to any legal credit agreement.

In the worst case NW repossess and get their money back and instead of the ex homeowners left out of pocket their parent are instead. But either way NW get first bite on that cherry and the financial fate of the parents will be of zero concern to NW.

Maybe it's just a way of advertising high LTV mortgages still while finding any reason not actually offer them?

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3 minutes ago, HovelinHove said:

I had a viewing yesterday of a house that has suddenly come back on, already 30k below previous asking, I went in another 20k below that...will probably be rejected, but not worried. The reason it was back on was a broken chain, and the vendor is packed up ready to go...I suspect that most chains will collapsing at the bottom because of this kind of thing along with requirement for deposits of 15-20%. This, combined with unemployment etc is absolutely baking in falls of 15-20% over the next year.

Talk about keen! Packing everything before the sale is sound!

But hopefully this should make them more likely to consider your offer. (if they can afford it, or get the rest of the chain to reduce).

It will be interesting to know how they react to your offer now.

I agree this article is another reason that chains will collapse at the bottom, so surely prices will have to fall to get these chains going again from the bottom.

I have noticed quite a few reductions lately, eg.. noticed a house reduced by £30k yesterday, that went up for sale in February, originally asking £230k...a big reduction for a first reduction.

https://www.rightmove.co.uk/property-for-sale/property-89176772.html

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4 minutes ago, nightowl said:

I'm not sure why NW care who makes up the deposit if it's effectively a gift and not subject to any legal credit agreement.

In the worst case NW repossess and get their money back and instead of the ex homeowners left out of pocket their parent are instead. But either way NW get first bite on that cherry and the financial fate of the parents will be of zero concern to NW.

Maybe it's just a way of advertising high LTV mortgages still while finding any reason not actually offer them?

It’s because if mum and dad lend you money and then struggle themselves then you will be more inclined to help them first rather than pay your own mortgage, maybe you would be more inclined to take a mortgage holiday for example.

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1 hour ago, Postman said:

Very good. This will ensure genuine hard working ftbs don't get leap frogged by Tarquin with a trust fund

targuin will just buy for 100% cash and wont need to borrow like the proles at nationwide. ?

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7 minutes ago, nightowl said:

I'm not sure why NW care who makes up the deposit if it's effectively a gift and not subject to any legal credit agreement.

In the worst case NW repossess and get their money back and instead of the ex homeowners left out of pocket their parent are instead. But either way NW get first bite on that cherry and the financial fate of the parents will be of zero concern to NW.

Maybe it's just a way of advertising high LTV mortgages still while finding any reason not actually offer them?

Think it through a bit further as follows: mum and dad put in 10% deposit 5 %  , prices stay stable even if nationwide lends less. Nationwide does not lose if prices drop up to 15%. 

But if nationwide thinks prices may go down MORE than 15% , then they can't allow that. As they might lose.  So they tighten up the criteria as they have done. 

Mortgages with higher deposits are unaffected, ie lots of them.

So it suggests they are trying to insulate themselves from losses on a house price drop of about 20% from pre covid levels ( and factoring that in as a possibility )

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20 minutes ago, 24gray24 said:

Think it through a bit further as follows: mum and dad put in 10% deposit 5 %  , prices stay stable even if nationwide lends less. Nationwide does not lose if prices drop up to 15%. 

But if nationwide thinks prices may go down MORE than 15% , then they can't allow that. As they might lose.  So they tighten up the criteria as they have done. 

Mortgages with higher deposits are unaffected, ie lots of them.

So it suggests they are trying to insulate themselves from losses on a house price drop of about 20% from pre covid levels ( and factoring that in as a possibility )

Agreed. Also, they only want people who are capable of being good debt slaves even if their house loses 15% of its value. They want responsible (compliant) greater fools only now.

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4 minutes ago, HovelinHove said:

Agreed. Also, they only want people who are capable of being good debt slaves even if their house loses 15% of its value. They want responsible (compliant) greater fools only now.

That's my take on it.

28 minutes ago, 24gray24 said:

So it suggests they are trying to insulate themselves from losses on a house price drop of about 20% from pre covid levels ( and factoring that in as a possibility )

15-20% now pretty much baked into the system in my opinion, with the possible chance of bigger falls, but I am not going to hold my breath.

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27 minutes ago, 24gray24 said:

Think it through a bit further as follows: mum and dad put in 10% deposit 5 %  , prices stay stable even if nationwide lends less. Nationwide does not lose if prices drop up to 15%. 

But if nationwide thinks prices may go down MORE than 15% , then they can't allow that. As they might lose.  So they tighten up the criteria as they have done. 

Mortgages with higher deposits are unaffected, ie lots of them.

So it suggests they are trying to insulate themselves from losses on a house price drop of about 20% from pre covid levels ( and factoring that in as a possibility )

I couldn't work out why they would do this, but that makes sense.

Looks like if you apply for a mortgage and don't have full accounts showing regular savings  (or an explainable inheritance) that meets around the 20% deposit they want, then you'll get a "No".

It will be interesting to see how many of those "Sold" banners disappear from Rightmove.

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19 minutes ago, stop_the_craziness said:

I wonder if they are going to differentiate depending on where that BOMAD money comes from.   For example, if Mum and Dad are doing equity release is that considered more risky than if they are taking it out of their cash savings?

Good point. There’s a ‘financial expert‘ chap in our local paper, and not a week goes by where he doesn’t shoehorn equity release into his column as the solution to world peace. 

at the end of the day it won’t make much difference, because the kind parents who scrape together 5-10k to ‘help’ (or in reality, just propping up a ponzi) their kids will always get outgunned by those who can stump up 50-100k like it’s chicken feed, and the lenders will happily accept.

mind you, 50k is now just a 15% deposit on a reasonable home where I am, which shows the absurdity.

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1 hour ago, nightowl said:

I'm not sure why NW care who makes up the deposit if it's effectively a gift and not subject to any legal credit agreement.

In the worst case NW repossess and get their money back and instead of the ex homeowners left out of pocket their parent are instead. But either way NW get first bite on that cherry and the financial fate of the parents will be of zero concern to NW.

Maybe it's just a way of advertising high LTV mortgages still while finding any reason not actually offer them?

It's because part of the point of a deposit is to show you are not financially stretched and can save a significant sum from your income. 

Even if the money from mum and dad is a gift, if you haven't been able to save any money yourself then a slight knock might leave you struggling to pay the mortgage. 

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This is a really odd one. 

Banks do not give an f whether you can save or not. All they're interested in is whether you will make the monthly repayment or not (since most people will generally prioritise the mortgage over everything else, it's a fairly safe bet). 

Considerations of future employment are not relevant to the deposit (though clearly something lenders are going to be cautious about when looking credit worthiness in general) nor are parents future finances relevant if they have no legal charge on the property (in my experience BOMAD generally gifts rather than loans a deposit).

It really does feel like they're just trying to keep lower deposits out of the market. As others have pointed out this is going to impact more working/middle class families whose parents might be able to scrape together £10k or £20k as opposed to wealthier families. 

That said it could be a blessing in disguise if it prevents those same people taking out a mortgage on a property that will then fall in value by 20% and possibly take years to recover. 

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2 hours ago, nightowl said:

I'm not sure why NW care who makes up the deposit if it's effectively a gift and not subject to any legal credit agreement.

In the worst case NW repossess and get their money back and instead of the ex homeowners left out of pocket their parent are instead. But either way NW get first bite on that cherry and the financial fate of the parents will be of zero concern to NW.

Maybe it's just a way of advertising high LTV mortgages still while finding any reason not actually offer them?

Money might have come from MamnDad borrowing money.

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8 minutes ago, PeanutButter said:

Oh yep that never even crossed my mind, makes sense.

Applying for credit allows bank to run checks on you.

It doesn't have automatic permissions to check parents, bans, uncle etc.

Besides, if a large part of the deposit comes from parents its probably reasonable to assume they might be required to stub up for the mortgage payments too.

Bank o mamndad has a sniff of guarantor loan idiocy.

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40 minutes ago, PeanutButter said:

Oh yep that never even crossed my mind, makes sense.

Quite possibly, but if they did, they would have been assessed as a good credit risk and able to repay the funds. So the questions remains as to what it has to do with NWBS?

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