Boost for first-time buyers as Nationwide launches family mortgage scheme

Over recent years, house price growth has accelerated at a faster pace than wage growth. This has made it harder and harder for first-time buyers to get into the property ladder, with more than half of them now turning to their parents for help in funding their deposit.

Now, the UK’s biggest building society has launched a new mortgage scheme designed to help parents raise money in order to help their children onto the property ladder. Nationwide has announced the launch of its Family Deposit Mortgage – a new scheme designed to let parents raise money to help their children buy a home.

Parents and children can each borrow up to 80%of the value of their respective properties and both mortgages have to be through Nationwide. Existing customers releasing money to give to a family member get a 0.2 percentage points discount on their mortgages while new customers get a discount of 0.09 percentage points.

This Is Money reports that Nationwide currently has mortgages starting at 1.15%, meaning that customers who release extra cash could pay as little as 0.95%.

Family members are classified as being a spouse, civil partner, parent, brother, sister, child, grandparent, grandchild or someone whose relationship with the applicant has the characteristics of a family relationship such as a step-child or partners.

Henry Jordan said, Nationwide’s head of mortgages, said: “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. The aim is to help not only first-time buyers but also home movers to secure their own property.

“We know that trying to raise a deposit can be the most significant barrier to becoming a homeowner. This Nationwide range will enable families to give mutual support to each other and provide new options for homeownership.”

Parents contribute an average £17,500 to their child’s first home

Rachel Springall, a spokeswoman for financial website Moneyfacts, welcomed the Nationwide deal. She says: “At a time when house prices continue to rise, borrowers pay out on rent and their savings don’t reach very far, any kind of assistance to help struggling first-time buyers get on to the property ladder will be a bonus.”

Research from Legal and General has found that almost six in ten first-time buyers have to turn to their parents for help in buying a property. On average, parents contribute £17,500 to their child’s first home.

Mortgage expert David Hollingworth, sounded a note of caution to borrowers thinking of taking advantage of the Nationwide deal. He said: “Thousands of first-time buyers are still having to rely on the Bank of Mum and Dad to get onto the housing ladder. But while most parents would probably help out their children when it comes to buying a home, you’ve got to make sure you can afford to take on the extra debt or you could get into serious trouble.”