The Bank of Mum and Dad is a force to be reckoned with; Lending or gifting money to members of your family to help them buy their first home is nothing new. However, research suggests that more people are turning to this solution more than ever before.
According to the latest figures, the number of homebuyers taking out loans with the Bank of Mum and Dad is at an all-time high. According to Legal & General research, around 19% of home purchases in 2019 were made with the help of family members. In 2020, this had increased significantly to 23% of all home purchases.
Consequently, this technically makes the Bank of Mum and Dad one of the top 10 lenders operating in the UK.
A Growing Gap on the Housing Market
Record house prices which continue to grow each month are making it difficult or impossible for an entire generation to realistically consider home ownership. In 2019, the average deposit paid by a first-time buyer was just under £46,500. In 2020, it had increased by as much as 13% to exceed £57,200.
This is the kind of money the majority of first-time buyers do not have and don’t have the means to save up. Consequently, the study from L&G reached the conclusion that at least 33% of first-time buyers will need to rely on support from friends or family or other funding means such as a fast bridging loan to buy homes within the next five years.
As the costs of purchasing a property in the UK continue to skyrocket, even the most well-meaning family members are finding it difficult to provide the level of financial support required.
Second Charge Mortgages a Popular Option
It is often the case that parents and grandparents looking to help close family members get on the property ladder are themselves cash poor but asset rich. In such instances, one option for lending or gifting a deposit to a family member is to consider a second charge mortgage.
A second charge mortgage taken out against owned equity can be a surprisingly flexible and cost-effective option when looking to raise a significant amount of money in a short period of time. The facility works in predominantly the same way as a conventional mortgage, enabling the applicants to repay the loan gradually over the course of several years.
Remortgaging or increasing the size of a current mortgage is also an option – affordability varying significantly from one facility to the next.
If considering a second charge mortgage, a secured loan or remortgage to support the planned property purchase of a family member, consult with an independent broker beforehand. As the most competitive deals are often not available on the High Street, it is essential to conduct a whole market comparison with the help of an experienced specialist such as UK Property Finance.
Craig Upton supports UK businesses by increasing sales growth using various revenue streams online. Creating strategic partnerships and keen focus to detail, Craig equips websites with the right tools to increase traffic. Craig is also the CEO of iCONQUER, a UK based SEO Firm and has been working in the digital marketing arena for over a decade. A trusted SEO consultant and trainer, Craig has worked with British brands such as FT.com, DJKit, UK Property Finance, Serimax and also supported UK doctors, solicitors, builders, jewellers, to mention a few, gain more exposure online. Craig has gained a wealth of knowledge within the digital marketing space and is committed to creating new opportunities working with UK companies.