More family-funded home buys predicted
IT’S a new year and inevitably there comes a whole new set of property predictions.
According to JMW Solicitors, 2016 will see a record number of family funded house moves as property buyers continue to rely on financial help from their loved ones to get that first step onto the housing ladder.
The law firm predicts that rising demand and higher property prices are making it increasingly difficult for buyers to stand on their own two feet, despite government moves to help first-time buyers, as outlined in the recent Comprehensive Spending Review.
JMW has analysed national data from the English Housing Survey from the past six years, which revealed that the percentage of people financing property moves with help from family and friends has risen every year since the peak of the UK financial crisis in 2008.
In 2008-09, when questioned on the source of finance for the purchase of their current property, 5.3 per cent of respondents answered ‘a gift or loan from family or a friend’.
This percentage has continued to climb in each consecutive year, reaching seven per cent in the most recent report of 2013-14.
Andrew Garvie, conveyancing specialist and partner at JMW, said: “We have every reason to believe this figure will continue to rise as a result of the increasingly high demand for property, at a time when prices are higher than ever before.
“In 2015 I’ve dealt with a record number of cases where buyers are using money from parents and other family members to fund their deposit, and I expect this will be surpassed in the next 12 months.
“While there are many benefits in this approach to purchasing property, it’s important for buyers and those providing the financial assistance to ensure adequate legal measures have been taken from the outset.
“The most common scenario, and the one accepted in the main by mortgage lenders, is that the funds are to be gifted by the family member rather than a debt be created. If the money is a loan however, this should be specified at the start, and simple trusts can be implemented to safeguard the funds so no confusion arises in the future – particularly if the buyer is cohabiting with an unmarried partner who could become entitled to a share in the property if they contribute to the mortgage repayments.”