House prices have soared – from an average house price in England (all properties) of £83,546 in November 2000 to a peak of over £312,000 in November 2022 – according to the HM Land Registry data.  This has now reduced to just over £285,000 in England (all properties), and year-on-year increases are slowing – which is good news for all buyers, but especially those first-time buyers who are saving for a deposit.

It’s no surprise then, that ‘Bank of Mum and Dad’ gave or loaned £8.8 billion in 2022 – up by almost £4 billion since 2019.  Note that gifting money can have inheritance tax (IHT) implications.  Individuals can gift a maximum of £3,000 a year, which can carry over into the following year, without it affecting IHT.  Any more than that could be liable for IHT.  A loan to a child who lives with their partner is likely to require protection by a deed of trust – in case they separate in the future.

If you don’t want to loan or give money to your children to help them buy their first home, there other things that can help.

You could encourage them to set up a Lifetime ISA (LISA) early – from the age of 18, in which they can get a contribution from the government of 25% on savings of up to £4,000 made each year.

Still technically Bank of Mum and Dad, you could take out a guarantor mortgage, whereby you offer your property or savings as security. You could also take out a joint mortgage with your child but beware of the additional 3% stamp duty you will have to pay if you already own a home.

Getting a mortgage has been difficult for first-time buyers over recent years, with minimum deposits of 80% or 90% being the norm.  The Mortgage Guarantee scheme, a government-backed guarantee to lenders offering 95% mortgages to first-time buyers came to an end on 31 December 2022 and the Help to Buy: Equity Loan scheme, in which the government could take equity in a property of up to 20% until you pay it back, ended last year, with the deadline for completions coming to an end on 31 March 2023.  However, reports are circulating that this scheme may be coming back – and it has already been extended in Wales until 2025.

 

Caroline Murray, partner and head of Graysons’ property team says:

“It’s still difficult for first-time buyers, but there is help out there, and now, after fifteen years, the 100% mortgage is back.  Skipton Building Society has launched its ‘Track Record Mortgage’ – a 100% mortgage aimed at those who don’t have access to the Bank of Mum and Dad to help with a deposit.  There are worries, as in 2008, that they may leave people vulnerable to negative equity if house prices fall.  However, Skipton is confident and is offering them to those with a strong history of making rental payments over a period of time, showing that they can afford the mortgage.  They are available to first-time buyers, over 21 years old only.”

Finally, there is growing interest in mortgages lasting 35 or 40 years.  Research shows that the practice has more than doubled over the last year and that around one in five first-time buyers opt for them. 18% of first-time buyers took out such a mortgage in February 2023, compared with 8% in February 2022.

If you want any advice on any of this information or want to get a quote for buying or selling a property, contact our experts now. You can also access our free calculator here www.graysons.co.uk/conveyancing-quote

There is more advice for first time buyers on our web pages.

Author: Caroline Murray, partner and head of Graysons’ property department.