Your children and the property ladder

The housing market hasn’t been kind to the current generation of first-time buyers, with the average price of a first home in the UK increasing by almost 40% in the last decade¹. In London, the price rises have been even more extreme.

Given this, many parents are keen to support their children in buying the right first home. And there are a number of ways you can do this.

Helping with the deposit

You can, of course, add money to your child’s own deposit as a gift to help them buy a better property than they might be able to afford on their own.

In addition to this, some providers offer ‘family mortgages’, like the Family Springboard Mortgage. With this option, you can provide security to your child’s mortgage by putting your savings, usually at least 10% of the property purchase price, into a linked account. This effectively acts as a deposit on the property they want to buy, and the money will be returned to you, with interest, after a set amount of time as long as your child keeps up the payments in line with the mortgage agreement. If they don't, it might take longer for your full savings amount and interest to be returned to you. You won’t be considered a guarantor on the mortgage, and your child will have full ownership of the property.

Guarantor mortgage

Alternatively, you can help your child afford a larger mortgage, and access a wider range of mortgage deals, by applying for a joint mortgage with them. You’ll effectively be acting as a guarantor, although you won’t be liable for Stamp Duty and your child will have full ownership of the property.

As you and your child will be responsible for the mortgage repayments and charges, it’s recommended that you take independent legal and tax advice so you understand the impact on your own finances and the risks involved.

Looking beyond London

Although the job opportunities and lifestyle of London make it a draw for many first-time buyers, more and more people are considering life outside the capital to get more for their money.

This chimes with MoneySupermarket’s annual First-Time Buyer Index report, which regularly ranks London as one of the worst cities for first-time buyers². The report assesses UK cities on job prospects, average salaries, disposable income and safety to identify the best, and worst, cities for first-time buyers each year. The top five ‘hot spots’ for 2019 are Bath, Wolverhampton, Chester, Aberdeen and Derby².

Cities like these could offer first-time buyers with a balance between where they want to live and work, and where they can afford to buy a property that will be a sound investment and provide them with a comfortable living space without eating up all their disposable income.