First-time buyer demand for family support builds

First-time buyer demand for family support builds

According to recent research, just under half of estate agents (47%) have observed a growth in the number of first-time buyers receiving financial support from family members.

Data from Key Partnerships indicated that out the 104 estate agents who took part, 35% have seen a rise in parents helping their children get onto the housing ladder, whilst 32% recognised that grandparents were providing financial backing.

These figures only further entrench the findings of previous reports, which revealed that growing numbers of first-time buyers were turning to the ‘Bank of Mum and Dad’.

Only 18% of respondents stated that they had not witnessed an increase in parental support over during the past 12 months.

36% of estate agents recognised that equity release plans can be used to assist first-time buyers in funding their deposit. These allow homeowners over the age of 55 to release property wealth without having to repay the loan or pay interest when they either die or go into a care home.

Raising a larger deposit can prove beneficial as it usually leads to a lower interest rate access on a mortgage and in turn, a lower LTV.

Data from the Bank of England indicates that a 95% LTV two-year fixed rate is, on average, 3.66%. However, for borrowers with the larger deposit of 25%, the rate will be reduced to 1.42%, for a 75% LTV at a two-year fixed rate. On £100,000 over a 25-year period, monthly repayments at 3.66% would be £509, whereas, at 1.42%, payments would be £369.

Commenting on the research was Will Hale. The director at Key Partnerships highlighted the increasing trend of first-time buyers to get financial help from family as well as the potential for equity release to provide support.

“Increasingly it is taking two generations to help first-time buyers on to the housing ladder with Bank of Mum and Dad having to work with the Bank of Gran and Grandad.

“Very few first-time buyers are able to raise the money for a deposit without financial support which is putting financial pressure on parents and grandparents. That is fine if they can afford it but there must be a concern that many are risking their own financial futures to help their family.

“Estate agents are valued as a source of financial guidance and it is clear that those who can discuss equity release as a potential alternative fund-raising solution will be able to benefit from an additional revenue stream by referring potential clients to a specialist as well as securing more house sales.”

 

 

Georgia Owen

Georgia is the Content Executive and will be your primary contact when submitting your latest news. While studying for an LLB at the University of Liverpool, Georgia gained experience working within retail, as well as social media management. She later went on to work for a local newspaper, before starting at Today’s Conveyancer.

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