The Bank of Mum and Dad is huge!

First Time Buyers trying to get on the property ladder will turn to the Bank of Mum and Dad to borrow more than £6.5bn this year, according to a report from Legal & General.  This equates to nearly 25% of UK property transactions and similar to being the country's ninth biggest mortgage lender!

The report suggests that the 'millennials' are the biggest recipients with 70% of the funding going to people under the age of 30.   

Although, a report from Prudential has also suggested that Mum and Dad worry about how their money is being spent and would like control over the gifted funds.  One in four worry it could be given to their children's spouses in the case of divorce and one third are mindful their children could squander the gift altogether!

First Time Buyers currently have a good number of options available to them, including mortgages up to 95% of the property value and where possible, parental guarantor mortgages. 

We've also seen a marked increase recently in enquiries for Right to Buy properties and those looking to purchase on a Shared Ownership basis:

Right to Buys are usually via the local council selling their properties to the existing tenant at a discounted price.  This discount can be up to £78,600 (£104,900 in London)  and applicants must have been a public sector tenant for at least three years.  Some lenders will allow borrowing of up to 100% of the purchase price.  If you resell your home within five years you will usually have to repay some or all of the discount you received, however remortgaging is usually allowed in this time period.  There are other schemes available to housing associations and the Government has plans to extend Right to Buy to more housing association tenants.

Shared Ownership Schemes are normally provided through housing associations.  You buy a share of your home, between 25% and 75% of the property value, and pay rent on the remaining share to the housing association.  You usually have the opportunity to purchase a bigger share of the property later on (normally called ‘staircasing’).  Local housing associations must confirm your eligibility in order to join these types of schemes.

Both schemes are proving popular in the local area and a wide number of lenders are looking to lend in both scenarios and to a number of different customer types, even those who may have had financial credit blips in the past.  So always seek advice.

Are you financially prepared for a rate rise over the next two years?

Many first time buyers engage the involvement of family members when it comes to purchasing their first property.   Either parents look to act as Guarantors to the mortgage, so giving the lender additional financial security.  Or it could be that they are ‘gifting’ the deposit towards the new purchase.

Gifted deposits can come from immediate family members, this can include step family, aunts and uncles and is acceptable for first time and subsequent buyers.  The money must be a transparent gift that has originated in the EU and can be easily traced back to the originating source.   A letter from the family member will usually be required and needs to advise the gift amount, relationship the person gifting the monies is to the applicant, confirmation that it is a gift and not a loan and therefore is not repayable, confirmation that they do not currently own the property being sold and that they will not live in the property or have any interest in the property post completion.

The average first time buyer purchase price climbed 16% over the last year, hitting a record high of £155,832, according to the latest First Time Buyer Tracker from LSL Property Services.  The average first time buyer deposit has also increased to £27,519.

Nationwide’s House Price Index has reported that UK House prices increased by 0.6% in February and were 9.4% higher than February 2013.  The average house price now sits at £177,846 across the UK and £345,186 in London.

Legal & General have found that two thirds of consumers are not financially preparing for a rate rise over the next two years.  Their Mortgage Mood quarterly survey highlighted that many borrowers are missing an opportunity to secure a long term low rate now, rather than regret later.

Finally, AToM was delighted to be recognised in the latest Mortgage Strategy Awards.  At an event deemed ‘The Mortgage Oscars’, held at the Grosvenor Hotel on Londons Park Lane and attended by over a 1,000 guests, AToM were placed second in the ‘Best Specialist Mortgage Distributor’ category.  Thank you to all who voted for us and well done Team AToM!