Money Insider: Bank of mum and dad vital to first-time buyers

 

Two separate reports published this week have highlighted the level of financial assistance family members have provided to help their nearest and dearest take their first step on the property ladder.

The situation for first time buyers has been extremely difficult since the banking crisis first took hold over four years ago, but it has gradually started to get a little easier.

Back in 2008 and for much of 2009 it was nigh on impossible to find a mortgage unless you had at least a 25 per cent stake to put down, which was simply not achievable for most would-be borrowers.Even if you somehow managed to overcome the high deposit requirement, the interest rates and product fees at the time made the deal too expensive.

The situation today is much improved with many lenders now offering more affordable 90 per cent loan-to-value deals and one or two even prepared to consider borrowers with just a 5 per cent deposit.

Many people have probably forgotten just how expensive mortgages were for new buyers four years ago when compared with today.

For example a two-year fixed rate in September 2008 for a 90 per cent LTV mortgage from C&G was 6.25 per cent plus a £1,000 fee, whereas today Yorkshire Building Society is offering 4.95 per cent and £495 fee for a 90 per cent two-year fix.

Similarly an 85 per cent LTV three- year fix would have cost you 6.39 per cent and a 1 per cent product fee from Principality Building Society four years ago, but today First Direct is offering a 90 per cent LTV rate of just 4.89 per cent and no fee. The difference in cost is staggering with the First Direct mortgage (25 years) cheaper by £5,095 over the three-year fix period compared with the best deal available in September 2008.

It's no surprise therefore that research released today reveals that in the last five years 100,000 first time buyers (FTB) have turned to the bank of mum and dad to help them get a mortgage for a home of their own.

The value of family-assisted FTB purchases in this period totalled £23bn – or £5.6bn a year. Without help, the report estimates, in the last 12 months alone, 20 per cent of FTB property purchases would not have taken place.

The report, carried out for HSBC by the Centre for Economics and Business Research, was backed up by a separate piece of research published this week by Saga, which states that one in eight over-50s already give their children or grandchildren money for a deposit to buy their first home.

It reveals that 10 per cent give young family members between £5,000 and £20,000 while a further 7 per cent give more than £20,000.

There may be less reliance on family finance as a source of funding than in 2008 but for those who don't want to rent and line the pockets of a landlord, it may be their only route to home ownership.

Andrew Hagger is an independent personal finance analyst from

www.moneycomms.co.uk

Lenders offer lower rates – some with no fees attached

There was more good news for mortgage borrowers this week as the battle for best-buy supremacy continues to drive down rates.

If you've got at least 35 per cent equity in your home and you're looking to remortgage, Clydesdale and Yorkshire Bank is now offering a two-year fixed rate of 2.99 per cent and has temporarily scrapped the usual £999 arrangement fee.

With some lenders already announcing increases to their standard variable rates, there are likely to be many borrowers considering their next move, but if you like the sound of this 2.99 per cent deal, you'll need to act quickly as it's only available until 11 November.

If you're looking to fix your repayments for longer than two years, you can currently get 2.74 per cent with a £1,499 fee for a three-year fix to 65 per cent LTV with First Direct.

For five years take a look at Post Office where at the moment you can lock in at 3.59 per cent to 75 per cent LTV with no product fee.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Customer Service Advisor

    £15000 - £16000 per annum: Recruitment Genius: A Customer Service Advisor is r...

    Ashdown Group: Trainee Consultant - Surrey / South West London

    £22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

    SThree: HR Benefits Manager

    £40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

    Recruitment Genius: Office Manager / Financial Services

    £30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

    Day In a Page

    The difference between America and Israel? There isn’t one

    The difference between America and Israel? There isn’t one

    Netanyahu knows he can get away with anything in America, says Robert Fisk
    Families clubbing together to build their own affordable accommodation

    Do It Yourself approach to securing a new house

    Community land trusts marking a new trend for taking the initiative away from developers
    Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

    David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

    The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
    With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

    Money, corruption and drugs

    The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
    America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

    150 years after it was outlawed...

    ... America's first slavery museum is established in Louisiana
    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
    Tony Oursler on exploring our uneasy relationship with technology with his new show

    You won't believe your eyes

    Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
    Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

    Moores must go. He should never have been brought back to fail again

    The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
    War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

    The battle for Mosul will unleash 'a million refugees'

    Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
    Yvette Cooper: We can't lose the election. There's too much on the line

    Yvette Cooper: We can't lose the election. There's too much on the line

    The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
    A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

    It's not easy being Green

    After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
    Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

    Gorillas nearly missed

    BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
    Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

    The Downton Abbey effect

    Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
    China's wild panda numbers have increased by 17% since 2003, new census reveals

    China's wild panda numbers on the up

    New census reveals 17% since 2003