Getting onto the property ladder is more difficult now than at any time since the Victorian era.
Data from Schroders reveals that house prices have risen from around four times average earnings in the mid-1990s to more than eight times more recently. This has contributed to home ownership rates falling to around 64% in the past five years, levels last seen in the early 1980s.
With Zoopla reporting that the average first-time buyer deposit for a three-bedroom home is £34,500 – rising to an eye-watering £144,500 in London – it’s perhaps no surprise that would-be buyers are increasingly leaning on their loved ones for financial help.
Read on to find out more about how the “Bank of Family” is helping to support almost half of all home purchases in 2023, and for three practical ways family members can support first-time buyers.
Bank of Family will support more than 300,000 house purchases in 2023
New research from Legal & General has revealed that the “Bank of Family” will provide support for almost half (47%) of house purchasers under the age of 55 in 2023.
Previously known as the “Bank of Mum and Dad”, the term has been changed to reflect the contribution of other members and the breadth and diversity of modern family structures more accurately.
The Bank of Family is expected to help fund 318,400 housing transactions in 2023 giving, on average, £25,600. The total value of properties bought with Bank of Family assistance is predicted to reach £124.6 billion this year.
These figures are higher in London, with Legal & General reporting that more than two-thirds (67%) of all homeowners in London will receive parental support to purchase their homes. Bank of Family recipients in London receive £30,200 on average.
Bernie Hickman, CEO, Legal & General Retail: “While family gifting has always played a prominent role in the UK housing market, our study shows that the value of those contributions has risen by more than a quarter on pre-pandemic levels.
“Gifting a deposit is an incredibly kind and generous thing for those who can afford it, but it shouldn’t be a necessary part of the homebuying process.”
Here are three practical ways the Bank of Family can help a first-time buyer onto the property ladder.
3 ways the Bank of Family can help a first-time buyer
1. Helping them to save a deposit
One practical way to assist a first-time buyer is to let them live with you to help them save up a deposit.
Indeed, Legal & General found that almost a third (31%) of parents and grandparents have welcomed adult family members to live with them to make it easier to save for a deposit, while a further 37% would be willing to house their adult children in the future.
The insurer estimates that buyers save an average of £24,900 towards their deposit when living with family members.
2. Gifted deposits
One of the most common ways that family members can support a first-time buyer is by gifting part or all of the deposit they need.
When it comes to getting a mortgage, a lender will likely want a borrower to declare any gifts they use for their deposit and whether they are expected to repay the money. This is sometimes referred to as a “gifted deposit declaration”, signed by the parties giving the gift.
If it is a loan, lenders may take this into consideration for affordability purposes and reduce the borrowing potential.
Most lenders are happy to use a family gift as a deposit.
3. A “family mortgage”
In recent years, some lenders have introduced innovative schemes to enable family members to support a first-time buyer onto the property ladder. These are commonly known as “family mortgages”.
One of the most popular, the Barclays “Family Springboard Mortgage”, sees the “helper” open a Barclays savings account in their name and transfer 10% of the property purchase price into it as security for the mortgage.
The borrower can then borrow the full purchase price of the property, as the lender has this security in place.
After five years, if the borrower has kept up with the mortgage payments, the “helper” gets a return of their 10% security, plus interest.
The advantage of this scheme is that the family member essentially only loans the money and will receive their “gift” back five years down the line.
Many other lenders offer similar “family mortgage” schemes, using the family member’s income, own home, or gift as security for a first-time buyer loan.
Get in touch
As an independent broker, we can access a wide range of first-time buyer mortgage schemes to find the most appropriate arrangement for you and your family.
Email info@alturafin.com or call us on +44 (0) 20 3411 0079 to find out more.
Please note
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
