Despite the headlines, first-time buyers are getting a foot on the property ladder, with a little help…
So here’s the thing. Conventional wisdom has it that things have never been tougher for first-time buyers and, of course, in one sense that’s right. House prices are at record highs, deposits on new homes are hefty (often 15 per cent or more), and mortgage lenders have set stricter criteria (requiring details of social spending as well as pay and household outgoings).
But there’s another side to this coin- that there have never been more ways for first-time buyers to get on the ladder, especially with the help of their parents. So there is at least some good news and this is backed up by figures from consultancy Dataloft. ‘In 2016, 42 per cent of all mortgage loans for purchases [not including remortgages] were to first-time buyers, up from 34 per cent in 2011,’ explained Dataloft’s senior research analyst Anna Zaccaria.
More figures, from estate agency Haart, suggest that across the country the number of first-time buyer registrations rose 20 per cent across the UK in the year to March 2017, with a still-larger 28 per cent rise in London over the same period.
Other data from Kate Faulkner- one of Britain’s leading housing market commentators and an adviser to consumer group Which?- shows that 68 per cent of first-time buyers in 2016 purchased without parental contributions. Faulkner stoutly defends the 32 per cent who called on Mum and Dad. With over half of all homes owned outright without a mortgage, she says, ‘Who wouldn’t want to help their kids if they could?’
So if you’re in that position- a parent or prospective young first-time buyer- what options are available?
1. Guarantor Mortgages
With these, the about a FTB can borrow is based on the parent guarantor’s income and assets as well as their own. If a FTB fails to meet one or more payments, the guarantor must step in.
2. Joint Mortgages
Both parent and offspring are named on the deeds, meaning both are liable for maintaining mortgage payments. Both have to agree to sell the property, too, so there is ongoing control.
Presuming the parents own a property, with or without a mortgage still being owed, they could take out a further loan against the value of their home. They could then pass this on, with as many or few strings as they wish, to the FTB.
4. Innovative Solutions
Barclays, for example, has a 100 per cent mortgage for first-time buyers. Called a Family Springboard Mortgage, it requires another family member (usually a parent) to ‘lodge’ ten per cent of the property’s value in a designated Barclays saving account. It’s then returned three years later, with interest.
As with all house purchasing, it’s useful to consult an independent mortgage broker, as well as useful websites like which.co.uk and moneyfacts.co.uk. And when you decide your chosen path as parents and offspring, don’t be afraid to get a solicitor to draw up a legally binding agreement- some borrowers insist on it. It helps focus all parties involved in the deal.
Good luck. Literally tens of thousands of parents and their grown-up children buy homes every year and it’s a great way to have new generations on the property ladder- with a little help, experience and planning from the wise old grey hairs to add stability.