Help them to flourish
Loan.co.uk launches new guides for parents and children relying on the Bank of Mum and Dad
Young people are taking loans from the Bank of Mum and Dad in order to get on the property ladder, but have they fully considered what this means for the family and the options available to help fund those first steps?
A series of new guides to help parents and children consider steps to get onto the housing ladder and the financial options available is being launched by Loan.co.uk.
Paul McGerrigan, CEO Loan.co.uk, says: “The requirement to put down a large mortgage deposit remains one of the most significant barriers for first time buyers. Considering earnings and outgoings, the average-earning couple with a child would take almost 12 years to save up a deposit on a two-bedroom home.
The guides are designed to set out the circumstantial differences between getting a foot on the housing ladder today to when they may have first bought in the 70’s or 80’s. It also faces the potentially thorny issue of recovering the gifted sum and considerations they should make to protect all interests.”
The Bank of Mum and Dad now funds a quarter of property purchases and is the ninth biggest lender in the country, with parents lending their children the money to put down a deposit, or acting as guarantor on the mortgage.
Paul McGerrigan adds: “The regulatory changes that we saw in 2016 mean that advisers need a greater awareness and knowledge of a wider range of products to truly give the best advice. Our guides form part of a wider initiative to develop the Second mortgage market and to help advisers guide their clients through the products on offer. As Second mortgage packagers we have a huge role to play assisting in the knowledge transfer required.”
• Parents in the UK are spending £6.5bn a year to help their children get a foot on the property ladder, up from £5bn last year
• This makes them the equivalent of the 9th biggest mortgage lender in the country
• Borrowing from family and friends to help fund deposits will help younger home buyers complete on some 300,000 transactions this year
• The average age of a first-time buyer in the UK is now 30, rising to 34 in London
• The average transaction involves a contribution of £17,500, with three quarters of BOMAD purchases being funded by parents
•Over-55s are sitting on £1.5 trillion worth of property equity