First-time buyers are putting down an average deposit of £32,899, according to the Halifax. But this masks significant regional differences: in London, the average first-time buyer deposit is three times that at £106,577.
It is no surprise then that the deposit is the biggest barrier to home ownership for first-time buyers as wages fail to keep pace with the growth in house prices. Subsequently, most of the first-time buyers who come to us have significant financial assistance from the Bank of Mum and Dad.
There are a couple of things to bear in mind if Mum and Dad are offering financial assistance to first-time buyers. The first is that any help with the deposit needs to be a gift rather than a loan – otherwise the lender will take it into account when assessing affordability and will mean a smaller mortgage.
Secondly, if parents are going on the deeds, there may be extra stamp duty to pay, as there is a 3 per cent surcharge on second homes – and the parents are likely to already own a property. Subsequently, we are seeing a big increase in demand for joint borrower, sole proprietor mortgages, such as the Barclays Family Affordability Plan, which allow two borrowers to combine their borrowing capacity to maximise mortgage lending but only one of the applicants is listed on the deeds. This enables the child to take advantage of the parent’s additional income to get a bigger mortgage but they retain sole ownership of the property so legitimately avoiding the extra stamp duty.