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Nationwide cracks down on Bank of Mum and Dad


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2 hours 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 )

Am I being a bit slow here in not understanding this? If there is a 15% deposit, surely it doesn't matter whether the money was the buyer's own savings or a gift from the parents or won on a lucky dip scratch card. Either 15% is big enough or it isn't. 

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6 minutes ago, Ah-so said:

Am I being a bit slow here in not understanding this? If there is a 15% deposit, surely it doesn't matter whether the money was the buyer's own savings or a gift from the parents or won on a lucky dip scratch card. Either 15% is big enough or it isn't. 

Politicians want the plebs to beleive the 10% deposit and 3% SDLT is the issue. 

How to repay the rest 90% with interest on the inflated price is the question no establishment want to ask and scare the plebs.

 

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27 minutes ago, Ah-so said:

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?

Mebbe ‘tis just an excuse.

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2 hours ago, spyguy said:

Money might have come from MamnDad borrowing money.

Might have done borrowed but if mum and dad cant repay that its still not NWs problem.  As someone said it is an odd one but then its odd times and many arent thinking straight right now so why should NWs people!

I did hear years ago about building companies offering gifted 10% deposits in exchange for an 10% over valued new build and how that left the lender exposed to a 100% LTV while initially thinking it was a 90%.

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2 hours ago, Gush said:

Politicians want the plebs to beleive the 10% deposit and 3% SDLT is the issue. 

How to repay the rest 90% with interest on the inflated price is the question no establishment want to ask and scare the plebs.

 

I still don't understand. What if all the deposit is in the form of a gift from the parents, be five, ten or twenty percent? Why should Nationwide care?

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16 minutes ago, Ah-so said:

I still don't understand. What if all the deposit is in the form of a gift from the parents, be five, ten or twenty percent? Why should Nationwide care?

Repossession is difficult in normal time due to political and religious nature of property market, during this pandemic it would be even more difficult. So if property value falls and pleb lost the job and could not pay instalments? 

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Technically mum and dad gift the deposit but the bank obviously has no way to stop there being an informal agreement between the parties involved and depending upon how irresponsible the recipient of the 'gift' is, that obviously can have an impact on the ability of the applicant in paying the mortgage. 

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21 minutes ago, Gush said:

Repossession is difficult in normal time due to political and religious nature of property market, during this pandemic it would be even more difficult. So if property value falls and pleb lost the job and could not pay instalments? 

That's the same for whoever stumped up the deposit. I really don't see what point you are trying to make. 

Sorry if I'm being very dense. 

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I think a high deposit is normally a sign of someone with lots of free cash.

Having a 3rd party stub up all or part if a deposit might give the impression that the borrower was a bit more flush than they are.

But youd expect NW go be a bit more on the ball.

The reality is NW is back pedalling from all the daft lending and lenders theyve been doing busjness with since 2009ish.

 

 

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I suspect that in many cases mum and dad would borrow money from a bank and lend it to their child for their house's deposit. So the deposit is in fact another loan which is not disclosed on the child's mortgage application.

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Nope.

NW are exiting all the risky mortgage products.

Theyll want 30% no more than 3.5 LTI.

NW appear to have problems, and have had for a few years. They must be running out of road.

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5 minutes ago, spacedin said:

Actually on reflection, it's probably because they want mum and dad to act as guarantor for the mortgage. 

They existed (prior to COVID) as 100% mortgages with parents underwriting a significant deposit upfront, returnable in 3 years.  I haven't checked lately as to their availability, but I know a few who have actually used this option for what I deem as tiny starter homes.

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1 hour ago, spyguy said:

I think a high deposit is normally a sign of someone with lots of free cash.

Having a 3rd party stub up all or part if a deposit might give the impression that the borrower was a bit more flush than they are.

But youd expect NW go be a bit more on the ball.

The reality is NW is back pedalling from all the daft lending and lenders theyve been doing busjness with since 2009ish.

 

 

This is definitely the reason, the same as why someone who took a mortgage holiday is a credit risk.

If you are unable to save any deposit yourself, or weather a 3 month drop in earnings, you are living financially too close to the edge. With house prices not currently a one way bet, the banks want big deposits from boring customers. 

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2 hours ago, Ah-so said:

That's the same for whoever stumped up the deposit. I really don't see what point you are trying to make. 

Sorry if I'm being very dense. 

sorry if it was not clear. My point was the 90% of inflated price +interest is always ignored, given he/she can arrange tiny 10% deposit (mostly not from own savings)why should bank bother, it could work in a positive sentiment loop, but in this pandemic situation, they need to think more carefully if the 90% can be recovered in a default. How the deposit was scarmbled together can give big clue to that.

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22 minutes ago, Gush said:

sorry if it was not clear. My point was the 90% of inflated price +interest is always ignored, given he/she can arrange tiny 10% deposit (mostly not from own savings)why should bank bother, it could work in a positive sentiment loop, but in this pandemic situation, they need to think more carefully if the 90% can be recovered in a default. How the deposit was scarmbled together can give big clue to that.

Excellent point and something I've been suspecting too.

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There is something missing here. Could BOMAD have a claim ahead of the mortgage company (or risk having a legal precedent set?)  That would scare the **** out of them.

Some BOMAD might be borrowed, that would complicate claims in case of default - is there a risk of an IHT wheeze being spun up?

Litmus test if other lenders follow suit

 

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8 hours ago, msi said:

There is something missing here. Could BOMAD have a claim ahead of the mortgage company (or risk having a legal precedent set?)  That would scare the **** out of them.

Some BOMAD might be borrowed, that would complicate claims in case of default - is there a risk of an IHT wheeze being spun up?

Litmus test if other lenders follow suit

 

Legally, if you 'loan' a person money then you effectively give it away.

However ... families are ffing nuts.

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I still think the no more BOMAD is just an excuse.

Give it a few weeks and if people are not getting the message that NW dont want their business, then theyll come out with more reasons -socks dont match tie, too tall, too small, too fat, too slim.

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3 minutes ago, dragging boot straps said:

Got a friend who has never worked more than 4 days per week. Never earned more than £25k, never really done anything but go on holiday. 

Parents just bought her a £1 million house and she says she's "worked hard for it".

This nationwide change only affects the poorer fish. 

Perhaps that is why she didn't work full time or felt she needed to earn more than £25k......no debt £25k is more than enough to live on........what are the chances of any husband keeping up??

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So have I got this right... People with BOMAD gifts/loans look like they have a decent deposit (which apart from affecting the LTV, also signifies someone who is able to save). However now the banks realise they needed a BOMAD gift/loan because they're not so good at saving after all. This means a higher risk customer so should be given smaller mortgage and/or higher rate.

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1 hour ago, dragging boot straps said:

Got a friend who has never worked more than 4 days per week. Never earned more than £25k, never really done anything but go on holiday. 

Parents just bought her a £1 million house and she says she's "worked hard for it".

This nationwide change only affects the poorer fish. 

Rent a flat above a shop
Cut your hair and get a job
Smoke some fags and play some pool
Pretend you never went to school
But still you'll never get it right
'Cause when you're laid in bed at night
Watching roaches climb the wall
If you called your Dad he could stop it all, Yeah.

 

Can't blame her though! If you genuinely knew that all you had to do was ask your parents for a mill and you would get it, it takes a certain type of personality to say, nah, I'll earn it myself.

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