Property expert’s tips to get on the housing ladder without the Bank of Family

With the average deposit now standing at over £34,500, this is the biggest barrier to first-time buyers (FTBs) purchasing their own home.

According to a consumer survey by housebuilder Barratt Redrow, 62% of FTBs purchase with the aid of family money, primarily from parents, although 1 in 4 have support from grandparents, aunts and uncles, or siblings.

Just over half of families give £16,000 or more towards a house purchase. Over 3 in 5 parents and grandparents inherited the money that they gift to their family.

Getting the money back isn’t a priority for most of those gifting. Over two-thirds of families gift money without any expectation of repayment because they feel guilty about how difficult it is to get on the property ladder, according to Barratt Redrow.

Still, the new build developer does have a scheme known as Parent Power that rewards those gifting money for their loved one’s house purchase with £1,000, as well as giving another £1,000 to the buyer.

While the Bank of Family has become an essential requirement for many first-time buyers, 1 in 3 of those giving support do worry that gifting money will hurt their own standard of living. Respondents said they worried that giving money would mean that may need to delay their own retirement, sacrifice holidays and days out, or would struggle if the cost of living worsened.

There are signs that the higher cost of living and economic uncertainty are already beginning to take their toll, with a 5% year-on-year drop in FTBs who received financial support from their family last year, the survey found.

Adrian MacDiarmid, Head of Mortgage Relations at Barratt Redrow, said: “We’re continuing to see a significant number of first-time buyers turning to family for help getting onto the property ladder. With rising house prices and the increased cost of living, support from parents and other family members remains crucial for many.

“Our research found that not enough first-time buyers and their families are aware of schemes to help them, from Government, new build developers, and lenders. There are a wide range of schemes available to support first-time buyers, meaning family support isn’t the only route to homeownership. At Barratt Redrow, we’re focused on offering a mix of affordable homes and tailored support to help more people to take their first step onto the property ladder.”

Adrian’s six tips to get on the housing ladder without the Bank of Family

FTBs may be able to borrow more than they think. To support FTBs, lenders will offer enhanced affordability assessments to customers who can prove that they can afford the repayments.

For example, Nationwide’s Helping Hand mortgage offers up to six times’ income for customers who take a longer-term fixed rate of between 5 -10 years.

Every lender offers different rates and has different criteria, so it is only really by talking to a broker that FTBs can really understand what is available to them and what they can afford. I would advise that FTBs get advice at the earliest opportunity.

Low Deposit Mortgages

FTBs often presume that they need to have more deposit than they actually do. More and more lenders are offering mortgages at higher loan to values, meaning that many buyers only need a 5% deposit.

First Homes Scheme

If you live in England, you could be eligible for the Government’s First Homes Scheme, which offers a discount of up to 50% on new build homes. To qualify, you need to have an income of £80,000 or less (£90,000 in London).

Councils typically set local eligibility criteria, such as:

• key workers, as defined by the council
• people who already live in the area
• those on lower incomes

Shared Ownership Schemes

Shared ownership is a home buying scheme that allows consumers to purchase a share of a property, typically between 25% and 75%, and pay a discounted rent on the remaining share to a housing association. This makes it an affordable way to get on the property ladder when a full purchase is unaffordable.

Over time, you can buy additional shares in the property through a process called "staircasing," gradually increasing your ownership and reducing your rent until you own a house outright, if this is affordable.

Own New - Rate Reducer

Buyers could see mortgage interest rates that are 2.2% or below with Own New - Rate Reducer, a scheme available on new build homes for up to the first five years.

The scheme could mean lower mortgage rates and reduced monthly payments, whether you're a first-time buyer or an existing homeowner.

Dependant on the build stage of your chosen home, Barratt Redrow, and other developers in the scheme, could contribute up to 5% of the purchase price towards your move.

The Track Record Mortgage

If you rent a home and have a good track record of paying the bill each month, you could qualify for a specialised deal from Skipton Building Society - and you don't need to save a deposit at all.

The Track Record 100% mortgage from the lender is available to renters buying their first property.

The amount you can borrow is capped as your monthly repayment can't be more than you currently pay in rent. You need to show a strong track record of paying your rent on time and in full.

An independent mortgage adviser can help you apply for the deal and compare it to others on the market.

Key Worker Deposit Contribution Scheme

Barratt Homes and David Wilson Homes offer its Key Worker Deposit Scheme that celebrates the country’s millions of Key Workers including teachers, nurses, council workers and foster carers.

As a thank you for the support provided to communities, Barratt and David Wilson Homes is offering key workers a contribution towards their deposit.

With the scheme, for every £20,000 spent on the purchase price of a home, a contribution of £1,000 will be made towards the deposit - up to £15,000. For a home costing £300,000, you would qualify for a contribution of £15,000.