Two borrowers are better than one

Those new to property are finding they can still buy - with a little help from their friends. Christopher Browne reports
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The Independent Online

I t's a simple law of economics: what goes up, must come down. But property seems to baffle even the most ingenious of soothsayers, businessmen and economists. One day, the headlines read: "House prices slowing", the next: "Property faces a fall", and a week later: "Homes boom continues". One fact is inarguable, however. House prices in Britain are high and are likely to remain so for some time.

It's a simple law of economics: what goes up, must come down. But property seems to baffle even the most ingenious of soothsayers, businessmen and economists. One day, the headlines read: "House prices slowing", the next: "Property faces a fall", and a week later: "Homes boom continues". One fact is inarguable, however. House prices in Britain are high and are likely to remain so for some time.

The three-year surge in house prices has led to a flurry of economic spin-offs. A swelling network of lenders is now offering more than 4,000 mortgage products to lure today's smarter borrower, while more than 200,000 buy-to-let landlords are using their new assets to bring in a second income or to prop up an ailing pension.

But recent research has uncovered a more intriguing fact. Faced with a UK property price rise of 23 per cent in 2002, young, single people and first-timers are linking up to make their latest buys. A survey by the Council of Mortgage Lenders shows the number of mortgages taken out by pairs of friends or relatives almost doubled between 1997 and 2001. And last year's figure is likely to be higher.

Property, as we all know, can be unpredictable. One minute a good buy can suddenly become a bad one, while the next a run-down rural relic can be transformed into glittering mansion. One man who should know is Carl Eggerton, a support engineer with South Yorkshire police, who bought his first home 18 months ago.

"I bought it for £42,000 and have just sold it for £64,000," he says. Just the person, you might think, to move seamlessly on to the second rung of the property ladder. But alas, no, he was still struggling. "I found it really difficult paying all the bills at the house, and when I looked around for another property I simply couldn't afford it."

His solution? Eggerton teamed up with a work colleague, radio engineer Cecilia Mason, to buy a £94,000 three-bedroom, semi-detached home in Sheffield. "Cecilia's monthly rent was £150 higher than my mortgage and she was finding it even trickier to pay her way. So this was the ideal answer. By clubbing together, we've got an attractive property, a cheaper mortgage and lower overheads," says Eggerton, 28.

Bernard Clarke, of the Council of Mortgage Lenders, explains why it's a sensible option: "Rises in property prices have outstripped increases in income, so hitching up with a friend or relative to buy is a neat way to get your first foot on the property ladder.

"In many cases, it's more of a short- than long-term solution, unless of course you happen to get on very well with one other. For not only do individual situations change, but house prices may be more competitive in a few years' time, and one of you may wish to get your own place with a partner or spouse."

The property boom has had another, more unexpected, side effect: this is known as the Generation Boomerang. Now, almost a third of twenty- and early-thirtysomethings are opting to stay at home or move back to live with their parents, due to the high costs of buying a property.

"It's still a bit uncool to live with your parents in your late twenties and early thirties, but for many people it's a far better option than struggling to find a deposit for a home," says Christian Jenner of the UK charity National Family and Parenting Institute.

Builder Mike Tiffin, 34, would undoubtedly agree. He was astute enough to buy his own three-bedroom house in Hounslow, Middlesex, at the age of 19. But, seven years later, he lost his job, sold his house and moved in with his parents. "A lot of my friends became unemployed, found their mortgages and renting costs too high, and did the same," he says.

Then, a few months ago, Tiffin got a job in IT and is now saving for a £15,000-£20,000 deposit on a new property. As he says: "I hope to buy again in two or three years' time, when I can afford it and the market may have settled down."

Another member of the so-called Boomerang Generation is Matthew Steven. He sells telephone systems, and pays his mother £250 a month to live in her small house in Guildford, Surrey. "It's the cheapest option I could find in the current market and it gives me a chance to save up and buy my own place," he says.

"Boomerang" moves can sometimes backfire, however. Andrew Scott, of the estate agents Lane Fox, has seen many potential clients return home instead of buying a property in central London. "Going home certainly works for a short time," he says. "But in my experience, many parents are very keen for their children to retain their independence and, when they are ready to leave, virtually chase them out of the house again."

One pair who were particularly anxious to avoid such an unedifying exit were Phillip Savill, 27, and Erin Gordon, 28. After several years renting in Manchester, they wanted to buy places of their own. "We had previously lived with our parents in the city's Prestwich suburb and loved the area, and we did not want to move home again. As neither of us had a big enough salary to get a mortgage, we decided to pool our resources and buy together there," says Savill, a VAT inspector.

The friends have prudently given themselves a two-year sharing deadline. "We don't see this as a long-term situation as we realise one of us may meet someone and decide to settle down. So we are giving ourselves two years to see what happens and how the housing market lies," he says.

A wise policy, for buying jointly may not always be hazard-proof. "It's a great way to get on to the mortgage ladder, but avoid linking up with anyone you've known for only two months. Make sure your co-owner is trustworthy and financially stable, and it's important to have mutual aspirations, so when one decides to move, you both have a foolproof contingency plan," says David Hollingworth of London and Country Mortgages.

His advice is for prospective co-buyers to get a "tenancy in common" agreement drawn up by a solicitor. "This is more flexible than the traditional joint-tenancy agreements taken out by married partners and cohabitees, and means each sharer has a get-out clause should their circumstances alter."

And if one or both of you falls ill or loses their job, you could take out a joint mortgage protection policy, basing the monthly premiums on income size. It could be a neat way to beat the boomerang effect.

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