Halifax to axe vendor gifted deposits from private sellers

21 July 2011 | By Natalie Thomas

From Monday, Halifax Intermediaries will no longer accept applications which contain an element of vendor gifted deposit from private sellers.

The change, which also applies to customers going direct, will affect buyers who are receiving a cash incentive from a private vendor who is selling their property.

There is no change for customers who are receiving gifted deposits to purchase new build properties from either a professional property developer or builder i.e. builder gifted deposit.

In line with the current policy builder gifted deposits will still be acceptable up to the value of 5% where a disclosure of incentives form is completed.

There is no change in policy for buyers who receive a deposit from a close family member and these will still be permissible.

Halifax says with a vendor offering a deposit as a gift, the true purchase price and valuation of the property may be distorted which results in the incorrect LTV being calculated, which in turn could result in customers being offered incorrect products.

Applications received before close of business on Monday will still be honoured under the current policy.

After this date borrowers will no longer be able to include vendor gifted deposits as part of their mortgage application.

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Readers' comments (40)

colin | 21 Jul 2011 11:52 am
This is a real shame, but i guess not totally unexpected as Halifax were out on a limb being the only lender that allowed it.

It only worked where a buyer was able to get a decent discount from the guide price and the property valued up. Surveyors don t over value so I don t really see what Halifax's problem is, theres no real difference between a split 10% deposit and 10% from the applicants own resources.

A shame as its helped many FTB get a foot up.
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Andrew Rowe | 21 Jul 2011 11:59 am
Another kick in the teeth for first time buyers. Halifax have always known this method is another way of doing 95% mortgages. Are Halifax replacing with a first time buyer 95% mortgage?????
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Bryan | 21 Jul 2011 12:04 pm
I don't think Halifax realise what an impact this will have on an already flat market. The VGD worked a treat in Scotland as we still have the Home Report valuations.In the current buyers market, purchasers were able to buy undervalue and use the VGD to assist with the deposit. Another blow to FTB's and the market as a whole.
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Des Platt | 21 Jul 2011 12:05 pm
The news that they have got rid of vendor deposits is very bad as that was one of the few times I found I could use them . The last case I did with them was one where I negotiated the vendor deposit and it enabled the intermediary 85% rate to match the 90% direct rate. I've just had to send a 90% client to Halifax direct as they had a much better deal.The client thinks I'm fantastic for even giving him a contact there and it is flying through. I'm happy to do the insurance. They've hung honest brokers out to dry. It's such a pity because their technology is so brillant.

It astonishes me that brokers can vote for Halifax in awards when they have such differentials in pricing.I've no problem with the commercial reality of it ; I do ok anyway . No one now needs to use a broker to get a Halifax deal
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colin | 21 Jul 2011 12:35 pm
yes Des, thats the other very good bit was that if it worked you could get a 90% client and 85% deal and with it a far better rate.

I d love to know what the real rationale behind this is, because the email from my BDM is a load of tosh.....see below

Why are we making these changes?

On occasions a customer has no deposit of their own and the VGD is the only deposit. With a vendor offering a deposit as a gift, the true purchase price and valuation of the property may be distorted.

This results in an incorrect LTV being agreed. The implication of this to us as a bank is that customers are placed in wrong risk bands and capital account requirements on such loans could be miscalculated.
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Anonymous | 21 Jul 2011 12:40 pm
First we had the Government Shared Equity scheme (LIFT) hitting the buffers due to lack of funds and now HBOS have pulled the VGD scheme from under our feet. As a broker in Scotland this will have a massive impact on my business. How your average FTB can be expected to get on the property ladder is beyond me. In essence - no FTB = No housing market
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colin | 21 Jul 2011 12:44 pm
i notice that it says Halifax Intermediaries will axe VGD......does this also apply to the branch network I wonder!!!!!!!!!!!!!
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Anonymous | 21 Jul 2011 1:04 pm
Whilst it may have been good for business the distortion and inflation of the housing market that it may have generated has priced those FTB's who don't have the benefit of a gifted deposit out of the market. Maybe if propeties now sell for thier 'true' value we will see some benefits to those buyers!
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Matthew Williams | 21 Jul 2011 1:21 pm
Halifax have a good system? I have had nothing but problems with it. Full of bugs! And behind the scenes - the administration and underwriting time has been a joke!
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Luke Atkinson | 21 Jul 2011 1:21 pm
Apparently VGD will still be allowed via direct channels. Dual pricing and dual criteria. Nice one.
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