Relatives now funding half of first time buyer house deposits - Nationwide

Almost a third (31 per cent) said that they would be calling on the ‘Bank of Mum and Dad’, while eight per cent were reliant on other relatives such as grandparents, according to the research, which asked would-be and recent first time buyers about their home buying plans.

Another 15 per cent said that funds from an inheritance would be used for a deposit on a property.

There are also potentially damaging misconceptions about what can be used as a home deposit. While two thirds (63 per cent) said they were active savers into savings accounts, with a quarter (26 per cent) specifically identifying the Help to Buy ISA as their savings vehicle of choice, a significant proportion thought they could use a personal loan (10 per cent) or credit cards (5 per cent) to fund a deposit.

This is despite the fact that unsecured borrowing for this purpose could potentially damage their chances of securing a mortgage.

Those questioned were prepared to make sacrifices to achieve the home buying dream. When asked what they would give up in order to buy a home, more than half said they would give up nights out (55 per cent) and restaurant meals (51 per cent), although they were least likely to give up extra TV services and entertainment (28 per cent).

However, seven per cent said they’d even consider giving up a partner or spouse if it meant they could get a foot on the housing ladder. This rose to 11 per cent of the 45-54 age group who would forego a relationship if it meant they could buy a home.

Raising a deposit clearly represents the biggest hurdle for first time buyers. Those surveyed identified their biggest home-buying challenge as being able to pull together enough for a deposit on a home (30 per cent), with the price of the house (21 per cent) and cost of the mortgage (14 per cent) some way behind.

Nationwide recently launched the Family Deposit Mortgage range specifically designed to allow families to raise funds from their existing property to help another family member buy a home, including homeowners helping their children to take their first steps onto the property ladder.

Matt Smith, Nationwide’s head of product management for Mortgages, said: “The research bears out what we know – that raising a deposit, particularly as a would-be first time buyer, is often the biggest barrier to owning a home, and that family support can be vital to enabling them to take those first steps.

“It’s also clear that while the majority know how important saving for a deposit on a home may be, very often it’s extremely difficult to achieve without family support. However, they should never rely on borrowing to fund their deposit, such as credit cards or personal loans.

“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 to help another family member. This Nationwide range will enable families to give mutual support to each other and provide new options for home ownership.”

Three quarters (72 per cent) of those surveyed described themselves as savers. When it came to savings aims, the number one ambition was identified as building up enough for a deposit on a house (55 per cent), followed by saving for a rainy day or a nest egg (40 per cent) and saving up for holidays (38 per cent).

The majority were buying with a partner (57 per cent), but a quarter were going it alone, a figure that rises to a third in Wales and 30 per cent in Scotland. Buying with a friend was the preferred option for five per cent, although in London, with average first time buyer property prices of £410,000, this rose to ten per cent.

Women were more likely to want to buy a first home with a spouse or partner (62 per cent women against 50 per cent men). They were also more likely to want to live close to family than men (40 per cent versus 33 per cent).

Both existing Nationwide mortgage members and those remortgaging to the Society from another lender can apply for the Family Deposit Mortgage to raise extra capital for a family member. The buyer receiving the funds must have their own mortgage with Nationwide, selected from any product in the standard mortgage range. All of the additional monies raised must be provided as a fully gifted deposit. Those gifting the deposit to the buyer can access up to a total mortgage borrowing of 80 per cent loan to value (LTV).