Major mortgage lender bans first-time buyers from using deposits from Bank of Mum and Dad

The loan is strictly available for first-time buyers who don't have parental help.

Newcastle Building Society have announced that they will loan up to £350,000 to first-time buyers, with deposits as low as £5,000.

However, the loan is strictly available to those who do not have parental help.

The lender has said that the five-year mortgage (which has a fixed rate of 5.25% over a loan term of up to 35 years) was designed to help homebuyers who don't have the help of their parents to get on the housing ladder.

This comes as housing prices rise further out of reach.

Ben Smith, of the building society, said: “First-time buyers continue to face real challenges to getting that first foot on the property ladder – with rising house prices, higher rental costs and the cost of living making it harder than ever for people to save for a deposit.

“At Newcastle Building Society, we’re committed to doing everything we can to ensure that aspiring homeowners aren’t locked out of the market simply because they can’t build the kind of deposit that many traditional mortgage products demand.”

According to Savills estate agents, around half of all first-time buyers rely on their parents to fund their first home.

Their data shows that the Bank of Mum and Dad loaned out over £9 million last year, making it the biggest lender in Britain.

The trade body UK Finance said that first-time buyers who did not have help from parents typically had higher incomes than those who did.

Additionally, they found that buyers receiving help from their parents typically put down deposits of around £120,000, almost double the average deposit of a self-funded buyer.

Ranald Mitchell of Charwin Mortgages, explained that excluding mortgages from those with parental help would 'rebalance a market that too often favours those with access to the Bank of Mum and Dad.'

He continued: “While the minimum £5,000 deposit headline will still translate to nearer £10,000 once fees and costs are factored in, the fixed rate and extended terms provide a fair and sustainable path to homeownership.”

A survey by the Building Societies Association this year found that over 60% of adults labelled funding a deposit as a barrier to buying.

This new deal marks a first, as they are the only lender that has excluded those with help from their parents.

The lender offers five-year fixes at 4.95% for those with a 5% deposit, 4.9% for a 10% deposit, and 4.66% for a 20% deposit.

Financial planner at Mint Wealth, David Sterling, said it was 'hard to tell' if the mortgage was a direct response to circulating rumours that Rachel Reeves could impose taxes on family gifts in her November Budget.

“This type of innovation should be praised: supporting those who want to get on the ladder as soon as possible, who give signals that they can stand on their own two feet and save a deposit," he added.