Gifted Deposits: What Lenders Actually Want to See (And How to Avoid Delays)

The Bank of England held the base rate at 3.75% again after last month's meeting — but it wasn't quite the formality some of the headlines made it sound. Three of the nine MPC members actually voted for a hike to 4%, and inflation crept up to 2.9% in July on the back of higher energy costs following volatility in the Middle East. The next decision lands on 17 September, and I'd be lying if I said the outcome feels certain.

What's easy to miss in all that noise is what's been happening quietly at the other end of the market. Fixed rates at the lower loan-to-value bands have kept falling even while the base rate sat still — two-year fixes at 60% LTV are now available from around 4.3–4.5% with lenders like Danske Bank, a noticeably better deal than what's on offer higher up the LTV scale. That gap is why I've had more conversations about gifted deposits this month than almost any other topic: clients working out whether a contribution from family could tip them into a cheaper band.

Why the LTV band gap is worth chasing

Loan-to-value is simply how much you're borrowing against the property's value. Lenders price risk into it — the less you borrow relative to the value, the cheaper the rate, because there's more equity cushioning them if things go wrong. Right now that gap between bands is wider than it's been for a while. Moving from 90% LTV to 75%, or from 85% to 60%, can be worth well over a percentage point on your rate — which on a £250,000 mortgage is easily £100 or more a month, and thousands over a fixed term. A gifted deposit, even a partial one, is often the quickest way to close that gap without waiting years to save it yourself.

What actually counts as a gifted deposit

A gifted deposit is money put towards your purchase — usually by a parent, grandparent, or close family member — that you don't have to pay back and that gives the donor no stake in the property. That last part matters. If there's any expectation of repayment, or the person contributing wants their name on the title or a share of any future sale proceeds, it isn't a gift in the eyes of a lender — it's a loan, or a joint ownership arrangement, and it needs to be treated, and disclosed, very differently. Get this wrong and it can unravel an application at the eleventh hour.

What lenders will actually ask for

Every lender wants broadly the same things: a signed gifted deposit letter from the donor confirming the money is a genuine, non-repayable gift with no interest in the property; proof of the donor's identity; and a paper trail showing where the money came from and how it moved into your account. Solicitors will usually want their own version of the letter too, and both sets need to say the same thing. If the funds have moved between accounts more than once, or come from savings built up over many years, be ready to show that history — lenders and their anti-money-laundering checks are far more thorough about this than people expect.

The mistakes that slow things down

1. Moving the money too late — after the mortgage offer or underwriting has already started, which can trigger fresh checks and delay completion.
2. No clear paper trail — cash gifts, or money that's passed through several accounts, are much harder to evidence than a single traceable bank transfer.
3. Vague or missing wording in the gift letter — it needs to state explicitly that the money is non-repayable and the donor has no interest in the property.
4. Not mentioning it upfront — telling your broker and solicitor about a gifted deposit from day one avoids scrambling for documents against a deadline.
5. Multiple gifts from different people that aren't each properly documented — every contributor needs their own letter and evidence trail.

How to keep it simple

If a gifted deposit is part of your plan, get the conversation started early — ideally before you've even found a property. Ask the donor to keep the funds in one identifiable account for at least three months beforehand if possible, have the gift letter drafted using your lender's or solicitor's template rather than writing your own, and send it to me alongside your other paperwork so I can flag anything a particular lender is fussy about before it becomes a problem. Every lender's exact requirements differ slightly, and matching the right one to your circumstances is most of what I do.

With the rate picture still genuinely uncertain going into September, closing an LTV gap now — gift or otherwise — is one of the few things within your control. If you think a gifted deposit might be part of your next move, get in touch and we'll work out what it takes to get you into the best band available.

Kindest regards

Ian

Ian A Moore CeMAP — Director, IM Mortgage Consultancy Limited

Your home may be repossessed if you do not keep up repayments on your mortgage. IM Mortgage Consultancy Limited is authorised and regulated by the Financial Conduct Authority. This article is for general information only and does not constitute mortgage advice; rates and figures quoted were accurate at the time of writing and are subject to change.