With high house prices and mortgage rates, it is continuing to be difficult for first-time buyers to get a foot on the property ladder. Therefore, it isn’t uncommon for new homeowners to turn to their parents or family for financial support.
With the average deposit now standing at more than £34,500, this is thought to be the biggest barrier to first-time buyers (FTBs) purchasing their own home.
New research by housebuilder Barratt Redrow says that 62 percent of first-time buyers rely on the ‘bank of mum and dad’ to help them get on the housing ladder, and one in four have support from grandparents, aunts and uncles, or siblings.
Just over half of families give £16,000 or more towards a house purchase. Over three in five parents and grandparents inherited the money that they gift to their family.
Over two-thirds of families gift money without any expectation of repayment because they feel guilty about how difficult it is to get on the property ladder, according to Barratt Redrow.
Adrian MacDiarmid, Head of Mortgage Relations at Barratt Redrow, said: “We’re continuing to see a significant number of first-time buyers turning to family for help getting onto the property ladder. With rising house prices and the increased cost of living, support from parents and other family members remains crucial for many.
“Our research found that not enough first-time buyers and their families are aware of schemes to help them, from government, new build developers, and lenders. There are a wide range of schemes available to support first-time buyers, meaning family support isn’t the only route to homeownership.
“At Barratt Redrow, we’re focused on offering a mix of affordable homes and tailored support to help more people to take their first step onto the property ladder.”
Low deposit mortgages
First-time buyers often presume that they need to have more deposit than they actually do.
More and more lenders are offering mortgages at higher loan to values, meaning that many buyers only need a 5 percent deposit.
First homes scheme
If you live in England, you could be eligible for the government’s First Homes Scheme, which offers a discount of up to 50 percent on new build homes. To qualify, you need to have an income of £80,000 or less (£90,000 in London).
Councils typically set local eligibility criteria, such as:
- key workers, as defined by the council
- people who already live in the area
- those on lower incomes
Shared ownership schemes
Shared ownership is a home buying scheme that allows consumers to purchase a share of a property, typically between 25 percent and 75 percent, and pay a discounted rent on the remaining share to a housing association.
This makes it an affordable way to get on the property ladder when a full purchase is unaffordable.
Over time, you can buy additional shares in the property through a process called “staircasing,” gradually increasing your ownership and reducing your rent until you own a house outright, if this is affordable.
Own new – rate reducer
Buyers could see mortgage interest rates that are 2.2 percent or below with Own New – Rate Reducer, a scheme available on new build homes for up to the first five years.
The scheme could mean lower mortgage rates and reduced monthly payments, whether you’re a first-time buyer or an existing homeowner.
Depending on the build stage of your chosen home, Barratt Redrow, and other developers in the scheme, could contribute up to 5 percent of the purchase price towards your move.
The track record mortgage
If you rent a home and have a good track record of paying the bill each month, you could qualify for a specialised deal from Skipton Building Society – and you don’t need to save a deposit at all.
The Track Record 100 percent mortgage from the lender is available to renters buying their first property.
The amount you can borrow is capped as your monthly repayment can’t be more than you currently pay in rent. You need to show a strong track record of paying your rent on time and in full.
An independent mortgage adviser can help you apply for the deal and compare it to others on the market.
Key worker deposit contribution scheme
Barratt Redrow’s three brands – Barratt Homes, David Wilson Homes and Redrow – have a Key Worker Deposit Scheme that celebrates the country’s millions of Key Workers including teachers, nurses, council workers and foster carers.
As a thank you for the support provided to communities, Barratt Redrow is offering key workers a contribution towards their deposit.
With the scheme, for every £20,000 spent on the purchase price of a home, a contribution of £1,000 will be made towards the deposit – up to £15,000. For a home costing £300,000, you would qualify for a contribution of £15,000.
Contact one of our highly experienced mortgage advisors today on 0121 500 6316 to discuss your mortgage needs.
