While the latest figures indicate a slight slowing in inflation, economists are expecting interest rates to be raised further. Earlier this month, the Bank of England pushed the cost of borrowing to 5.25%, a move influenced by the drop in the energy price cap and food and living costs.
Nevertheless, the UK inflation remains stubbornly high overall compared to many other countries. According to money markets, there is an 84% probability that the Bank will raise rates by a quarter of a percentage point in September to 5.5% and are forecast to peak at 6% next February.
A third of first-time buyers have some form of financial help from family.
From the skyrocketing rent, and the increase of house prices to high-interest rates and the cost of living, the importance of financial support from parents has grown in recent years.
Our conveyancing solicitors have also observed the increase in parental support for first-time buyers leading us to offer some advice on becoming the Bank of Mum and Dad and other ways parents can help their children:
Helping with the deposit
One of the simplest and most affordable ways parents can assist their children with the buying of their first home is by contributing to the deposit. This is a significant help for young people and it’s less risky than co-signing a mortgage.
Also, if you are planning to leave your children an inheritance, at the current economic climate, we would suggest to instead help pay towards a deposit now while you are around to see them enjoy it.
Helping with the rising mortgage rates: Guarantor mortgage
While parents commonly assist with the down payment so they can apply for a mortgage, we are presently seeing more and more parents helping with their children’s mortgage application and payments.
If you want to help your adult children get on the property ladder or tackle rising mortgage rates, you can do so with a Guarantor mortgage.
Parents won’t own any share of the property but by being a guarantor you provide a safety net and can help your children secure a bigger mortgage or help them secure a mortgage if their credit score isn’t high enough and help with any repayments that your children can’t pay if needed.
If you are considering offering to be a guarantor for your child, please make sure that you fully understand the potential risk to your finances.
Family offset mortgage
For a slightly safer alternative than a guarantor mortgage, the family offset mortgage allows you to use your cash savings against the mortgage debt with some mortgage lenders even allowing parents to set their savings against their child’s mortgage debt.
There are many factors to keep in mind when buying a property for the first time, so it’s very important to work with a law firm that is experienced. Scott Rees & Co has extensive knowledge in offering professional conveyancing services for first-time buyers and would love to give you more advice on your individual options.
Use our contact form to get in touch, and our dedicated and reliable solicitors will assist you with your conveyancing in a friendly but professional manner.