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With house prices rising, it’s not news that first time buyers are feeling the pinch, and while schemes such as Help-to-Buy, shared ownership and changes to stamp duty tax aim to help first time buyers,there is ongoing debate about whether these initiatives go far enough in helping first time buyers.
A healthy rise in property prices is great news if you’re a homeowner, but for young people looking to get onto the market for the first time, these prices are becoming increasingly out of reach. The truth of the matter is, prices are increasing and increasing and, with them, the difficulty of getting onto the ladder for the first time.
The Bank of Mum and Dad are predicted to lend a massive £6.5 billion to their children this year in order to help them fund deposits for their first homes. This is a 30% rise on last year, meaning UK parents now rival the 9th biggest mortgage lender in the UK. However, while more parents are lending money to their children, the amount they are able to lend has decreased by 17% to £18,000, demonstrating that it is not just millennials who are now feeling the pinch. But parents don’t necessarily need to have a few thousand pounds lying around in the bank in order to help their children onto the property ladder. There are many other ways to offer some support and we will consider a couple in this blog. But to learn more about available options, we would recommend you arrange a free consultation with one of our mortgage advisers to discuss your situation.
According to the Legal and General report 2017, only a small minority – around 3% − of families currently use equity release to help fund their children’s’ home purchase. Equity release allows you to access the equity (cash) that is tied up in the family home. This can be taken out in instalments, in a lump sum that could be used as a contribution to a deposit, or a combination of both. The number of people using this option is expected to rise, as parents find it increasingly difficult to offer financial support.
While some will not be able to make such big financial commitments, there are still ways parents can help their children to save. Living at home is an increasingly popular way to save money for a house deposit, as the rent will potentially be cheaper than renting independently. Saving money on outgoings such as rent and food will mean house hunters are able to save quicker, and while it may seem like a drag at the time, it will be worth it in the long run.
It is clear that, with house prices being as they are, parents are playing an increasingly important role in helping their children onto the ladder. As with any other loan, it is always important to seek advice from an expert before offering any kind of financial support, as there may be tax or other financial implications. Our straight talking mortgage staff will be able to talk you through your options and your finances. Arrange a free consultation appointment now