Tapping into the bank of mom and dad

With mortgage rates at an all-time low it seems that there has never been a better time to buy. For first time buyers (FTBs) in particular, this is great news if they have saved the required deposit to help them step onto the housing ladder.

Independent estate agents and valuers Harrison Murray work alongside financial experts from The Mortgage Advice Centre to offer impartial and up-to-date advice on the latest mortgages available.

But for some raising a deposit can prove difficult.

Harrison Murray commercial director Nick Salmon said: “Young people often rent property because it provides them with the flexibility to be mobile, but when they become more settled there is always the nagging knowledge that rent is money down the drain.
“However, there is now an emerging trend for parents to fund purchase deposits for their children through the Bank of Mum and Dad.”

And many parents consider it a better use of their money. Recent figures reveal a record number of first time buyers are relying on their parents to purchase a property – with the average deposit now £32,000.

A study carried out this summer shows that around 80 per cent of under-30s tapped into the Bank of Mum and Dad to help them buy a home in April 2009.

The deposit could be given as a gift or as a loan and either way the maths should make sense. As a gift, providing the parent lives more than seven years, there should be no inheritance tax issue.

Further research shows thousands of parents (36 per cent of respondents) are releasing equity in their own home so their children get can a leg up the property ladder. This figure is up a quarter from 2007.

Nick added: “A sizeable majority of first time buyers have come into the branches with parents in tow and tell us that their deposit is coming from mum and dad – one Bank at least is seems is well and truly open for business.”

For more information, visit harrisonmurray.co.uk.