First-time buyers are being urged not to underestimate the support they could receive from family when it comes to purchasing a new home.
The latest Property Tracker report from the Building Societies Association shows raising a deposit for a mortgage is considered a barrier by 55 per cent of people. However, 58 per cent of would‐be first‐time buyers do not expect any financial assistance from their older relatives.
Despite this, the research reveals 71 per cent of parents expect to provide some financial help to the younger generation.
Jack Green, The Cumberland’s mortgage manager, says first-time buyers should not overlook the help on offer from older relatives. The Cumberland’s own Great First Time Buyer Survey, published in August, showed 51 per cent of people had help from family to buy their first home.
The challenge of saving was also reflected in the fact that 44 per cent of respondents said it took up to five years to put together a deposit.
“I think there can be a bit of stigma about approaching parents or other relatives for help buying a home,” said Jack.
“But the research from BSA shows that not only are family often willing to help, they actually expect it.”
Jack explains that although mortgage rates are at historically low levels, house prices themselves have risen by 10 per cent in the last year, meaning saving for a deposit is even tougher.
“Our experience shows that in the vast majority of cases relatives are willing to give money to younger family members as a gift, not a loan, which is a real boon for first-time buyers as it doesn’t add to their overall level of debt,” he said.
The Cumberland has even created a standard letter for those giving cash – usually parents helping their children – to declare that it is a gift that they do not require to be repaid.
“When we’re looking at affordability we’ve got to include any credit commitments, any loans that customers are due to pay,” said Jack.
“If they are getting this money and it’s due to be paid back then we’ve got to see whether that’s going to be affordable for them. But if it’s been gifted then there’s no regular payments to make and it doesn’t have any effect on the affordability side of things.
“We all know that it’s a competitive and tough housing market out there at the moment and so it makes sense to explore all the options for help to get on the property ladder. ‘The bank of Mum and Dad’ might be a bit of a running joke, but it’s becoming an increasingly common route to making your first property purchase.”
