For generations, family wealth has played a crucial role in helping younger buyers take their first steps onto the property ladder. In 2025, as affordability challenges continue to weigh on the UK housing market, family-gifted deposits remain a key driver of residential transactions. Yet, while financial assistance from parents, grandparents, or other relatives is often welcomed by borrowers, lenders approach these deposits with careful scrutiny.

Understanding how gifted funds are assessed today—and the implications for both buyers and their families—is critical to avoiding unnecessary delays or even mortgage refusals.

At Willow Private Finance, we see a significant proportion of our cases involving gifted deposits. Whether it’s a parent helping their child purchase their first flat in London, or grandparents contributing towards the deposit on a family home in Manchester, the mechanics of these transactions require precision, clarity, and compliance.

Lenders are open to gifted deposits in principle, but the way in which they are presented, documented, and structured can make or break an application.

Why Gifted Deposits Have Become So Common

The need for family support has grown in tandem with rising property prices and stagnant wage growth. In areas like London and the South East, where average deposits are well above £100,000, even high-earning professionals often struggle to fund their purchase alone. Family wealth has therefore become an intergenerational bridge, allowing younger buyers to overcome affordability barriers.

However, the fact that gifted deposits are common does not mean they are straightforward. In practice, lenders are concerned not only about the origin of funds but also the future implications of such gifts. Will the donor expect repayment? Could there be claims against the property later on? Are the funds genuinely available and free from outside liabilities? These are the types of questions underwriters will ask—and where applications can falter if handled without care.

The Key Issues Lenders Focus On

Lenders broadly focus on three critical aspects when assessing family-gifted deposits: legitimacy, legal standing, and borrower sustainability.

First, the source of funds must be legitimate and provable. Donors are typically required to provide bank statements, ID verification, and a clear audit trail of how they acquired the funds. Anti-money laundering regulations mean there can be no ambiguity.

For example, if funds were raised through the sale of an asset abroad, translated documents and certified evidence may be required. This mirrors the complexities we often encounter in expat lending—something we discussed in our blog on Currency Risk and Income Verification for Foreign Income.

Second, the legal nature of the gift must be clarified. Almost all lenders will insist on a signed “gifted deposit letter” stating that the funds are an outright gift, with no expectation of repayment or future claim on the property. Where the deposit is structured as a loan instead, lender appetite diminishes sharply. In fact, buyers considering a loan arrangement may find specialist solutions, such as a second charge mortgage, more appropriate. For further insight, see our piece on Second Charge vs. Further Advance in 2025.

Finally, lenders examine how the gift interacts with the borrower’s overall financial profile. While a large deposit may improve loan-to-value (LTV) ratios, lenders want to ensure the borrower can still sustainably service the mortgage. A family gift cannot compensate for weak affordability on income multiples or poor credit history. This mirrors broader underwriting principles we explored in our blog on How Mortgage Underwriting Has Changed in 2025.

The Risks Families Often Overlook

From our experience, one of the most overlooked issues in gifted deposits is the legal consequence of family dynamics. Parents often intend their contribution as an unconditional gift, but in the event of divorce or relationship breakdown, disputes can emerge over who benefits. Similarly, if the donor passes away, future claims may arise from other beneficiaries of their estate. These risks can be mitigated with carefully drafted declarations of trust or family agreements, but too often, families only consider these protections once disputes have already emerged.

Another risk lies in tax implications. While gifted deposits are not taxable at the point of transfer, they can form part of the donor’s estate for inheritance tax purposes if the donor passes away within seven years. With recent political focus on inheritance tax reform—something we covered in our blog on Inheritance Tax Planning with Whole of Life Policies—families need to plan with foresight, not just for the immediate purchase.

Practical Realities in 2025

In 2025, the mortgage landscape for gifted deposits reflects broader shifts in lending behaviour. With lenders under pressure from the FCA to ensure affordability and prevent undue risk, documentation standards have tightened. What might once have been a simple letter from the donor is now a multi-step compliance process. Some private banks and specialist lenders, however, are more flexible, particularly when larger deposits are involved, or the donor is an established high-net-worth individual. This is where whole-of-market brokers like Willow play a crucial role in finding solutions others may overlook.

For example, in cases where gifted deposits are combined with complex income—such as bonuses, commissions, or foreign earnings—high street lenders may decline. Yet private banks are often willing to take a more holistic view, assessing wealth and assets alongside income. This aligns with the themes we outlined in our blog on Mortgages with Bonus, Commission, or Variable Income.

How Willow Can Help

At Willow Private Finance, we specialise in navigating precisely these types of complexities. Our role is not only to secure competitive rates but also to ensure that every element of the deposit process—source of funds, legal clarity, and tax implications—is carefully addressed. We work closely with both borrowers and their families, coordinating with solicitors, tax advisors, and lenders to present applications that stand up to scrutiny.

Whether your deposit is being gifted from the UK or abroad, whether it involves simple bank transfers or more complex asset sales, we know which lenders will take a pragmatic approach and how to position the application to succeed. Importantly, we also help families think beyond the immediate transaction, ensuring their generosity today does not create unintended complications tomorrow.

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