One of the key outcomes of the recession / credit-crunch was a transition away from high LTV (Loan to Value) lending – up to 2008 it wasn’t uncommon to obtain mortgage finance at 100% LTV. However, as traditional lenders shied away from lending at high LTV’s Bank of Mum & Dad stepped in and picked-up the slack. Unsurprisingly, as parents have poured their life savings, pension pots, housing equity into little Susie & Jimmy’s 1st purchase house prices have swelled to stratospheric levels. There are some that argue that these seemingly harmless ‘gifts’ lead to “intergenerational unfairness” where money & wealth then only ever ends up sloshing around the same family unit. But with average house prices in the capital now hitting £500k it would take the average FTB (First Time Buyer) purchasing at 90% LTV approx. £70k to cover the required deposit, SDLT (Stamp Duty Land Tax), legal fees etc. from their own pockets. Perhaps with rent, transport & general cost of living at such eye watering levels it’s just unrealistic to expect FTB’s to save their own deposits like in the days of old?!
It’s not just cash that mum and dad are prepared to part with! There are a plethora of lending options available to parents (even grandparents!) that are determined to get their loved ones on the first rung of the ladder: guarantor mortgages, joint mortgage / sole ownership, additional security over additional properties etc. Undoubtedly, parents are recognising it is more difficult than ever to help their children realise their dream – or perhaps their own dream – of home ownership. Fortunately, for those less-endowed from a deposit perceptive mortgage options at 95% – and much more recently 100% LTV – are giving hope to the few that haven’t yet given up on their dream of owning their own home.