It is difficult to remember the last time Anderson Harris arranged a mortgage for a first-time buyer who didn’t have some form of assistance from parents or had inherited a large sum for a deposit. House prices have increased significantly over the past few years while salaries have risen at a much slower rate, making it extremely difficult for first-time buyers to purchase a home.
Research out this week from Legal & General reveals what we already suspected – that parents are significantly helping their offspring onto the housing ladder, to the tune of £6.5bn this year. This is similar to the amount lent by the Yorkshire Building Society, the country’s ninth biggest mortgage lender.
Hopefully, these parents will be gifting the deposit rather than lending it, as lenders will take a loan into account when calculating affordability. Because of this, parents may be interested in other options, such as becoming party to the mortgage to help their child to borrow more, assuming the parent has a strong income. Metro and Barclays offer ‘joint borrower/sole proprietor’ mortgages which have proved popular with first-time buyers as the parent is on the mortgage and liable for it, along with the child, but does not have to be party to the property deeds. This means the parent can avoid potential capital gains tax on disposal of the property and the extra 3 per cent stamp duty will not be applied when the property is purchased. The other advantage is that as long as the child can prove to Barclays that they can afford the mortgage in their own right at a later date, then the parents can be released from their obligations.
Another popular product is the Barclays Family Springboard mortgage where the first-time buyer doesn’t need a deposit as long as a family member or helper can provide 10 per cent of the property price as security in a savings account. This is returned after three years.