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Everything you need to know about the Bank of Mum and Dad

There are huge lenders in the mortgage market around the United Kingdom, with high-street names competing fiercely with one another for potential business. One of the largest current lenders may well surprise you, however, as rather than a large financial institution it is the bank of mum and dad which sits at 11th in the list of largest mortgage lenders in the UK.

Parents and family members are set to lend more than £6bn in 2019, which amounts to a higher amount in mortgage pay-outs than well-known brands such as the Co-Operative Bank and Skipton Building Society. With deposits becoming ever-increasingly difficult to amass, many people are now counting on their relatives to help them take that first step onto the property ladder; recent research from Legal & General and Cebr has found that nearly 20% of all property transactions are now aided by parents and grandparents.

Those lucky enough to be able to tap into this valuable resource will be aided predominantly by cash gifts, with some releasing the equity in their homes in order to help their children (16%).

Nigel Wilson, Group Chief Executive at Legal & General, says: “The Bank of Mum and Dad continues to be the ‘iceberg’ mortgage lender beneath the surface of our housing market – all but invisible yet exerting a massive influence, funding purchases across the country and helping people to defy the economics of affordability and realise their housing dreams.”

If you are thinking of using the bank of mum and dad, then there are a few considerations to take into account:

• Banks and building societies will accept a deposit, or part thereof, that has been gifted to you – some may require confirmation in writing that the money is indeed a true gift.

• If cash is gifted to you then this may be subject to Inheritance Tax (IHT) if the gift giver is deceased within seven years of the gift.

• Inheritance limits are £3,000 per year, and previous years’ allowances may be utilised before IHT comes into play. For example, two parents could gift £18,000 with no IHT due as long as they had not gifted anything in the previous three years.

• If the money is a loan, then this will need to be declared to your potential mortgage provider detailing repayments, interest, timescales and caveats.

House prices rise at fastest rate for 3 months

Mortgage lender Nationwide has indicated that house prices in August rose at the fastest annual pace in three months, with prices rising 0.6% year-on-year. This upturn in pace is contributing to the widespread sentiment that the housing market is beginning to perform particularly strongly once more.

Supporting the figures from Nationwide, reallymoving.com have published their August monthly House Price Forecast which predicts continuing growth in prices across the United Kingdom.

According to the report: “Average values are set to rise by 1.5% over the next three months (August to October 2019), continuing their steady climb. Particularly strong growth in August will see prices increase by 3.2%, and whilst they’ll then dip by 1.4% in September, they will be up 3.1% annually – the largest annual increase since November 2018.”

CEO of reallymoving.com Rob Houghton has this to say on the current status of the property market;

“The outlook for the property market over the next three months is remarkably positive, considering the current political and economic context. The recent election of a new Prime Minister who is committed to leaving the EU on Halloween even if a deal isn’t reached could mean clouds are gathering on the horizon, but any impact on prices in the short term is likely to be mitigated by the urgency of home movers to complete deals in the next three months.”

Rental market defying the usual slowdown

Rental properties have defied the usual summer slowdown which is often seen in the housing market due to several factors, including summer holidays and children not being at school. According to the latest data from the Agency Express Property Activity index, properties let nationally were up 6% month-on-month.

The Agency Express index is based on the number of lettings boards which are erected each month, and is therefore a particularly up-to-date measure of activity in the marketplace. According to the board company, as well as properties ‘Let’ being up 6%, the number of properties entering the lettings market also increased by 8.5% month-on-month.

Some regions which observed particularly strong growth are listed below:

Properties ‘to let’
South East 16.4%
Yorkshire & Humberside 16.1%
South West 10.8%
Wales 10.8%

Properties ‘let’
North East 17.2%
Yorkshire & Humberside 7%
South West 6.7%
London 5.8%
Wales 4.3%
South East 4%

Stephen Watson, managing director of Agency Express, commented: “July has been an unexpected month for the UK lettings market. Usually we would see slower movement throughout the summer holidays but this month’s activity, which is somewhat reflective of an increase in our customer base has been buoyant.

“Looking forwards, while we expect to see further increases in August, we don’t envisage a real pickup in activity until September. It will be interesting to see if the current rate of activity continues.”

Our guide on 'gazumping' and how to avoid it happening to you.

If you’re looking for a new home, or are looking for your first home, then “gazumping” may be a term that you aren’t particularly familiar with. Essentially, gazumping is when you have had an offer accepted by a seller, and are in the midst of the buying process, when another buyer comes along and offers a higher price, effectively stealing (or gazumping) the sale.

Over the period between January 2016 and October 2018, analysis by TwentyCi found that 16% of buyers were gazumped. In the current property market, where demand for properties is high, gazumping continues to be prevalent, and the research found that Sheffield is the area with the highest level – with 35% of buyers out-bid at the last moment.

Phil Spencer, TV presenter and co-founder of Move iQ, said: “For anyone who thought gazumping vanished with the runaway price rises of a few years ago, our findings will come as a reality check.

“Gazumping is alive and well, and still causing heartache for tens of thousands of buyers across England and Wales.

“Britain’s fragmented property market is throwing up huge regional extremes. In hotspots where prices are still rising fast, sellers can be tempted to go back on their word to a buyer if they get a better offer elsewhere.

“Meanwhile, in slow markets, the lack of homes for sale can lead sellers to leave would-be buyers in the lurch if they get a last-minute offer from someone else.

If you want to avoid the spectre of being gazumped, then having all of your buying processes in place before making an offer will help. These involve having a mortgage in principle in place, a conveyancing solicitor and a surveyor in mind; all will help to avoid long periods of waiting which offer the opportunity to others to make a higher offer. When you make your offer on a property, you could also ask as a condition of the offer that the property be taken off the market immediately which will then protect you from other prospective offers.

Britain’s Gazumping Hotspots

Sheffield – 35%
Madistone – 32%
Cambridge – 28%
Birmingham – 26%
Manchester – 25%

Tackling condensation in the home

If allowed to enter your home unchecked, dampness can cause untold damage to your property, possessions, and even to your health. Dampness can be expensive to remove, and at the very least, causes an unpleasant and lingering musty smell.

Condensation is just one form of dampness but it is the most common and often most ignored. During summer, your guard is down. How can my house be affected by condensation when it is a problem typically associated with cold weather?

The truth is that condensation can be caused by changing temperatures that occur within your household, and not just outside of it. Kitchens, bathrooms, and attics are more susceptible to this problem due to there being higher chances of steam or inadequate ventilation in these rooms.

So before your condensation issue escalates into a full-blown black mould problem, we have a few recommendations for you that can keep your home, health, and happiness better protected.

Know the signs

Nip your condensation problem in the bud by keeping an eye out for:

Excess water on your window sills
Peeling paint or plaster
Mould on clothes or fabrics
Musty smells
Presence of black mould

Unfortunately, by the time that some condensation warning signs are discernible, the damage can already be quite extensive, and that’s why it’s best to take a preventative rather than a reactive approach.

Our suggestions

When facing difficulties with condensation, good ventilation is key.

Give your house plenty of room to breathe. Leave small gaps between your furniture and walls, don’t cram too much into too tight of a space – as air will not be able to circulate efficiently – and hang wet laundry outside.

It is essential that your kitchen is properly ventilated whilst you are cooking! Cover pots and pans, and make use of your extractor fan. Don’t have one? Invest now and save yourself a bigger bill later on. It’s also important to have properly ventilated washing machines and tumble dryers.

If able, close your kitchen door when cooking or boiling a kettle. This may seem excessive but it will stop condensation spreading from room to room.

As for your bathroom, keep your windows open during and after baths or showers. Again, invest in an extractor fan if you have a windowless bathroom. Mould growth will thrive in this environment, and without proper bathroom ventilation, you risk breathing in these harmful spores.

Say no to condensation

Whether you are trying to sell your house, or simply live in it, condensation must be dealt with before the problem progresses beyond your control.

Ventilate your home following our suggestions and provide a cleaner, healthier environment for yourself and your household.

Government announces reforms to planning and Help-to-Buy

Housing secretary James Brokenshire has recently unveiled his plans to introduce new quality controls on housebuilders, whilst also implementing new legislation to try to prevent developers from selling houses on a leasehold basis through Help-to-Buy.

“We have long recognised that we have a responsibility to confront unfairness in the leasehold market,” commented Brokenshire. “Last year we consulted on proposals including the leasehold house ban and ground rent reduction.

“Today I can confirm we will go ahead with our original plan to reduce ground rents on future leases to zero, as opposed to a cap of £10 per year.

“And we will legislate to ensure that in the future save for the most exceptional circumstances all new house will be sold on a freehold basis. We are committed to taking bold action to reform the sector and will be pressing ahead as soon as parliamentary time allows helping us delivery our promise to make the home buying and selling process quicker, cheaper and easier.”

The housing secretary’s plans aim to help future homeowners in purchasing their first properties in a more timely and cheaper manner. These plans go hand-in-hand with the government’s pledge to deliver 300,000 new homes a year by 2020. According to the plans, if a buyer is sold a leasehold home then they will be able to get their freehold at no extra cost.

The Help-to-Buy scheme has been a flagship system that has been fundamental in first-time buyers entering the market since April 2013. From 2013 to 2018 the number of new-build property sales has increased from 61,537 to 104,245 – which can be largely apportioned to Help-to-Buy, with 38% of all new-build sales supported by the scheme.

A brief guide to your Help to Buy options

If you’re a first-time buyer looking to purchase a property, then you’ll almost certainly be aware of the Help to Buy scheme and its success in helping people get onto the property ladder. What you may not be aware of is how the scheme works, and how it helps buyers to secure deposits for homes that would otherwise be out of their reach.

With that in mind, we’ve put together a rough guide to how Help to Buy works.

Can you get a sufficient deposit together?

Most standard mortgages require a deposit of at least 5% of the value of the home you want to purchase. If you are able to get the capital required, then you may not need to apply for any scheme.

Equity Loans

If your deposit doesn’t stretch that far, however, never fear! This is where Help to Buy comes in. If you have a 5% deposit, you can apply for an equity loan for purchasing new-build properties. The Government will lend you up to 20% of the property’s price, but you’ll have to start paying interest on that loan after five years.

For example, should you purchase a £200,000 house, you’d pay £10,000 (5%), get a mortgage for £150,000 (75%) and the Government would loan you the remaining £40,000 (20%).

ISAs

If you’re still saving for that all-important deposit, then a Help to Buy ISA is available to you, with the Government adding 25% on top of the value of your savings, with up to 2.6% interest tax-free. A word of caution; if you’re considering this option, then you would need to apply for your ISA prior to 30^th November this year. Click here to learn more.

Shared Ownership

If you can’t stretch your finances to be able to afford the entirety of a mortgage, Shared Ownership provides you with the opportunity to buy a share of your home (between 25% and 75% of the property’s value) whilst paying rent on the remaining share. You can also buy bigger shares in the property once you’re able to, offering you flexibility for the future whilst owning a significant stake in the home you wanted.

Purchasing a home doesn’t have to be beyond any first-time buyer. Speak to our financial experts about your Help to Buy options and find out how you can finally buy the property of your dreams.