Nationwide is the UK’s second-biggest money lender. The building society may stop giving mortgages to first time buyers who have had the majority of help from others in saving for their deposit. The lender has also said first-time buyers should have deposits of at least 15 percent.
This is to stop them from slipping into negative equity.
Estate agents Savills found through a recent study 40 percent of all mortgaged first-time home buyers had assistance from family, usually parents.
Parents have contributed a total of £5billion towards deposits in 2019.
The new could come as a blow to first-time buyers who are struggling to get onto the property ladder.
Under Nationwide’s old policy they would have used the 95 percent LTV (loan-to-value) scheme, where they only had to save a 5 percent deposit.
The change by the building society was said to be due to “these unprecedented times and an uncertain mortgage market”, according to a statement made by Nationwide.
The building society said as a responsible lender, it needed to ensure borrowers could afford mortgage payments.
They said it was also to ensure that buyers do not fall into negative equity.
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This occurs if house prices decrease.
Negative equity occurs when someone owes more on their home than its value.
Chancellor Rishi Sunak has tried to resuscitate the property market by raising the stamp duty threshold from £125,000 to £500,000 until the end of March 2021.
This has caused a surge of 49 percent in buyers of £400,000 to £500,000 houses.
The coronavirus lockdown deflated the market as consumers were not allowed to visit prospective properties.
In June property prices in the UK have fallen for the first time since 2012.
Mortgage lenders expect UK house prices to fall in the second half of the year.