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3 helpful ways the Bank of Family could support aspiring homeowners

December 21, 2024

Category: News

Property prices have outstripped wage growth over the last decade, and it’s made it more difficult for aspiring homeowners to get on the property ladder. If you want to lend a helping hand to someone who is struggling to buy a home, there’s more than one way to do it.

According to the Halifax House Price Index, the average home in the UK was almost £294,000 in October 2024 after it hit a record high following an annual rise of 3.9%.

The Office for National Statistics reports that the average wage for a full-time employee as of April 2024 was just under £37,500 a year. So, the average property is more than seven times the average wage, and it’s perhaps not surprising that families trying to buy a property are facing challenges.

So, if you want to support a family member with their homeownership plans, here are three options you might want to consider.

1. Gift or loan a deposit

According to Legal & General, family members helped fund around 335,000 property purchases with £9.2 billion worth of lending in 2024 – a record high.

The average amount contributed to a property deposit was £27,400, and the majority of recipients said they would have to delay their home purchases without the generosity of loved ones. In fact, 1 in 10 said they would not be able to buy at all without support.

It’s estimated that the Bank of Family will support a staggering 42% of all homes purchased by buyers under 55 in 2024.

Gifting some or all of a deposit could help loved ones get on the property ladder far sooner. However, it may be important to consider how gifting a lump sum could affect your finances now and in the future.

If you have the capital to lend support but need the money to meet other goals in the future, offering the money as a loan could also be valuable.

While it might seem strange when lending money to loved ones, working with a solicitor could be advisable. They could help ensure both parties understand the commitment and when the money will be repaid. Working with a legal professional could also offer you some protection if issues arise in the future.

One thing to be mindful of with a loan is that a mortgage lender will consider this when assessing the mortgage application. As the repayments would be an additional financial commitment, it could affect how much they’re able to borrow.

2. Allow family members to move in

One of the first challenges an aspiring homeowner faces is saving a deposit. Many families find it impossible to pay rent and save enough to build up the deposit they need.

So, moving in with family members is an option many people are considering.

Indeed, a survey from Skipton Building Society found that 4 in 10 people would consider moving back in with their parents, and over three-quarters agreed it would help them save for a home much quicker.

On average, they estimate they could save around £800 a month towards a property deposit if they didn’t have to pay rent. It means your loved one could potentially save a sizeable £20,000 deposit in just over two years.

If you’re in a position to open your door to loved ones, it could make a real difference to their home ownership goals.

It’s often important to set clear boundaries when family members move in to ensure you’re all on the same page. Discussing if they’ll pay rent, contribute to household expenses, or be responsible for chores before they move in could be useful.

3. Use a family mortgage

A family mortgage could allow the aspiring homeowner to access a mortgage without a deposit or to benefit from a lower interest rate, which could make repayments more affordable.

With a family mortgage, you’d place some savings into an account that’s linked to the mortgage. This money is locked away for a defined period and will act as security against the mortgage.

If the mortgage holder meets all their repayments, your savings will be returned to you. However, if they miss repayments, you could lose some or all of your savings.

A family mortgage might be useful if you have a lump sum that is earmarked for a long-term goal that you don’t need access to in the short term. However, it’s important to be aware of the risks before you proceed.

Contact us if you’d like to discuss mortgage options

If you’d like to talk about how a family mortgage could be used to help your loved one get on the property ladder, please get in touch. We’ll help you understand if it could be the right option for you as well as explore the alternatives.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE.

Approved by The Openwork Partnership on 13/12/2024.

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