A major mortgage lender has shaken up the market by launching a new deal that blocks first-time buyers from relying on parental contributions, often referred to as the “Bank of Mum and Dad.”
Newcastle Building Society announced a fresh product this week that allows first-time buyers to borrow up to £350,000 with deposits starting at just £5,000. But the crucial detail is that applicants must fund the deposit themselves without any financial support from parents or family.
The building society explained that the mortgage is a five-year fixed-rate product set at 5.25%, available over terms of up to 35 years. According to the lender, this is designed to give opportunities to buyers who might otherwise struggle to compete with those receiving family assistance in today’s tough housing market.
Ben Smith, from Newcastle Building Society, said first-time buyers are facing more obstacles than ever before. With house prices continuing to rise, alongside higher rents and the wider cost of living squeeze, saving for even a small deposit has become a major challenge for many aspiring homeowners.
Smith stressed that the aim of the new mortgage is to level the playing field. Too many potential buyers, he said, are excluded from the market simply because they cannot access the large deposits that traditional mortgage products often demand.
Industry data highlights just how dependent many people have become on family help. Savills reports that nearly half of first-time buyers currently turn to their parents for financial support, making the Bank of Mum and Dad effectively the UK’s biggest housing lender.
The scale of parental lending is striking. Figures suggest that more than £9 billion was provided by parents last year to help children onto the property ladder. Those who received this help typically managed to put down deposits of around £120,000 — nearly double the average amount saved by buyers who rely entirely on their own funds.
According to UK Finance, the trade body for lenders, first-time buyers who do not use parental support generally have higher incomes than those who do. However, they still face significant hurdles in trying to save enough for a deposit while balancing rising living costs.
Mortgage experts have been quick to comment on the implications of the new product. Ranald Mitchell, of Charwin Mortgages, said excluding parental assistance could help to “rebalance the market” and provide more equal opportunities for those without family wealth.
Mitchell pointed out, though, that while the product’s minimum £5,000 deposit sounds attractive, in practice the figure will often be closer to £10,000 once fees and other costs are included. Even so, he said the fixed rate and extended terms provide a fair and sustainable pathway to homeownership.
Justin Moy of EHF Mortgages argued that buyers who save their own deposits may in fact represent a better risk for lenders. He suggested that Newcastle’s move underlines the importance of clear disclosure around deposit sources, and compared it to how lenders adjust pricing for energy-efficient homes based on EPC ratings.
Research from the Building Societies Association earlier this year found that 61% of adults view saving for a deposit as the single biggest obstacle to buying their first home. For many, this remains the key barrier despite a variety of government schemes introduced over the years.
The new deal also marks the first time a lender has explicitly excluded parental contributions from eligibility criteria. Alongside the flagship product, Newcastle Building Society is offering alternative five-year fixed deals, including 4.95% for a 5% deposit, 4.9% for a 10% deposit, and 4.66% for a 20% deposit.
David Sterling, of Mint Wealth, said it is difficult to know whether the move is linked to speculation that Chancellor Rachel Reeves could introduce taxes on family gifts in her forthcoming Budget. However, he argued that the product should be praised as an innovative way to support self-reliant buyers.
Sterling concluded that encouraging people to save independently for their deposits sends a positive signal to the housing market. He suggested that products like this can help ensure those who have shown discipline and determination are not priced out of homeownership by those with access to family wealth.
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