A roof over everyone’s heads
Between historically high house prices and punishing mortgage rates, first-time buyers have it tough. No wonder, then, that more than one in 10 people aged 30 to 34 are still living with their parents, up from 8.6% a decade earlier*. According to research by Legal & General, a third of parents and grandparents welcomed adult children back home to help them save for a house deposit, and 77% of buyers received money towards a deposit from family members. ‘Increasingly, parents are stepping in by gifting deposits, guaranteeing mortgages, releasing equity in their home or even moving to a cheaper property to free up money,’ says Paula Higgins, CEO of Homeowners Alliance.
OPTIONS FOR FAMILY WANTING TO HELP:
GIFTING A DEPOSIT ‘The most popular route for those who can is to give their children money to make up any shortfall in their deposit and boost their borrowing power. This way, they can access a cheaper mortgage deal while also reducing the inheritance tax bill,’ says Paula.
GUARANTOR MORTGAGES ‘For parents who can’t afford to give a lump sum of money, there are ‘Bank of Mum and Dad’ mortgage options out there, including guarantor mortgages, family offset mortgages and joint borrower mortgages. ‘Products come and go, so it’s best to speak to a mortgage broker to talk through options,’ says Paula.
If the Bank of Family can’t help, there are still a few Government schemes that are designed to make first-time home ownership more affordable, she says. The Help to Buy initiative sadly ended in 2022, but current options include:
THE MORTGAGE GUARANTEE SCHEME, which runs until June 2025 and is designed to help buyers with a 5% deposit to buy a home. Access this through a mortgage broker.
SHARED OWNERSHIP, where you buy a portion and pay rent on the rest, is also an option for those on lower incomes who wouldn’t be able to purchase a home on the open market.
SAVING INTO A LIFETIME ISA may seem like a no-brainer, since the Government gives savers aged 18-39 a 25% bonus to go towards the purchase of a first home up to £450k, but watch out as the scheme may not help those wanting to buy in more expensive areas of the country.