One in twelve houses that are bought in the UK are funded in part by a gift from a buyer’s friend or family member, according to a new study.
Out of the 1.125m houses that were purchased last year, 90,900 involved a deposit that was given to the future home owner by someone else, an increase of 29.6% on the previous year, while general house purchases have increased by just 3.6%.
The new study also found that 17% of first-time buyers relied on help from their parents or friends to get onto the property ladder. It’s estimated that the ‘Bank of Mum and Dad’ lent over £5bn in 2016, making it the UK’s tenth largest lender.
The study was carried out by My Home Move, and chief executive, Doug Crawford had this to say: “With property prices racing ahead of earnings, we’re expecting to see the gifted deposit rate surpass the 10pc mark soon.
“However, a large-scale reliance among first-time buyers on gifted deposits is unsustainable, so it is important that those without the luxury of a gift from family and friends can get on the ladder if the market is to work for everyone.”
Parents and grandparents are being encouraged to help their millennial relatives to get onto the property ladder, as house prices continue to rise while earnings stagnate.
Help to Buy Isa
Figures suggest that help from family and friends has been used more than the Government’s Help to Buy scheme. While more than half a million of these schemes have been set up, Government figures show that the scheme has been used for just 38,595 transactions.
However, the figures do suggest that the Help to Buy scheme is making it easier for younger people to buy. The average age of those using the scheme is 27, compared to the national average first-time buyer age of 30.
The properties that are being bought with help from the scheme also cost less on average, at £169,045, compared to the first time buyer average of £183,000.
The scheme has also been criticised for rules that have left some buyers out of pocket. It can only be used to buy properties that are worth under £250,000 outside of London, and £450,000 inside London.
Some who bought shared ownership properties discovered at the last minute that they were unable to use the scheme because the total value of the property was over the limit. Despite that fact, the portion they were buying was under.
The scheme is only available to use at completion, meaning that the money cannot go towards the initial deposit, another issue that many buyers found out too late.
Whether you’re looking to make your first step onto the property ladder, looking to give a helping hand to a loved one or just looking to save a few pounds. Give us a call and talk to one of our advisors, who will talk you through how we find you the most suitable mortgage for your current circumstances
Peter Lane & Partners
In partnership with Bright Advice, Peter Lane and Partners, were established in 1990 and have been at the forefront of the property market ever since. In 2016, they were the number 1 estate agent in Huntingdonshire, selling more properties than any other agent.
If you’re thinking about buying or selling, get in touch with Peter Lane & Partners today.
Your home may be repossessed if you do not keep up repayments on your mortgage.