Just When You Thought Your Kids Were Becoming Independent
There has been some good news with regard to the housing and secured loan markets over the course of the past few months, with the number of sales increasing as well as the number of secured loans being approved.
What is particularly encouraging for the market as a whole, is the number of first time buyers who are returning to the market and applying for their first loan or mortgage. It is true that now is almost certainly the best time to buy, with house prices as low as they are likely to be and interest rates on loans the cheapest they are ever likely to be, however, the one thing which seems to be holding first time buyers back is the lack of deposit to meet lenders’ current loan to value restrictions.
As a result of this, an ever increasing number of first time buyers are now turning to their parents to help them fund the necessary deposit, so that they are able to meet the lenders criteria of a maximum loan of 75 or 80 per cent loan to value ratio.
The council of Mortgage Lenders (CML) has classed this as the “Bank of Mum and Dad” and claim that there has been a dramatic increase in this type of parental help in order to help their children get a suitable and affordable loan. According to the figures from the CML, somewhere in the region of 80 per cent of first time buyers receive help with a deposit from their parents, whereas this figure was as low as around 40 per cent prior to the start of the credit crunch, when most lenders would offer loans of up to 95 per cent loan to value and in some cases more.
For many parents, this will be a gift to their kids, but for others it will be seen as a good investment, due the likelihood that the value of property is likely to increase at a greater rate than that of their building society savings account!
