First-time buyers could face additional difficulty getting onto the property ladder following yet another restriction introduced by a major mortgage lender.
Nationwide has announced it is capping any gift towards a deposit at 25 per cent of the deposit amount for lending above 85 per cent LTV, while also limiting those products to a maximum term of 25 years.
This comes after last month it announced an increase in its lending limit to 90 per cent LTV for first-time buyers in response to the government’s stamp duty holiday. At the time the building society said as a “responsible lender, enhanced criteria [would] apply”.
For David Hollingworth, associate director of communications at L&C Mortgages, the building society’s restriction on gifted deposits was just another response by a lender to the prevailing capacity crunch in a bid to help it limit the flow of business.
Since the pandemic started the high LTV market has seen lenders coming in and out with restrictions on the number of applications accepted each day, limited launches, and product withdrawals after high demand.
Coventry for Intermediaries for instance launched products available during a two-day window, while brokers have reported daily limits on the volume of lending available at HSBC.
Mr Hollingworth said Nationwide’s gift cap would be a “difficult hurdle” for some first-time buyers, but regarded the restriction as a necessary measure to ensure flow of business to the lender “doesn’t quickly become a tidal wave”.
Mr Hollingworth added: “With these capacity issues in the market we really need to see a broader range of lenders re-enter the 90 per cent market to allow for a more sustainable product offering.
“Until then there’s bound to be limitations placed on availability of these products as well as rising rates, let alone the chance of a return to the 95 per cent LTV deals that were standard practice only six months ago.”
Adam Wells, director at Lloyd Wells Mortgages, said he was not concerned by the deposit restriction but did think the term limits were an issue, as for most first-time buyers their priority was to keep monthly payments low in order to afford other living expenses.
Mr Wells said: “Any that are lucky enough to be getting a large gift from parents shouldn’t worry, as HSBC are still the lender we are doing the most business with at 90 per cent LTV”.
Aaron Strutt, product and communications director at Trinity Financial, said larger banks and building societies had been “under pressure” to return to higher LTV tiers, but were “worried about the economy” at the same time.
Mr Strutt said: “Nationwide wants borrowers with low deposits to be more self-sufficient and less reliant on their parents.
“More of the lenders are starting to come back to the 10 per cent deposit market but the acceptance criteria is tougher than normal.”