Family Proving Helpful for Home Buyers to Purchase and Helpful for Homeowners Struggling

Family Proving Helpful for Home Buyers to Purchase and Helpful for Homeowners Struggling

Home buyers finding it hard to get onto the property ladder due to higher interest rates, and higher asking prices, and due to the difficulty in saving for a deposit are turning to the Bank of Mum and Dad and even extended family members to assist. In a recent study by Legal and General (L&G), family members are expected to help in 318,400 property purchases this year. Close to 47% of properties bought by home buyers under the age of 55 will get financial assistance from family members with their purchase.

The L&G financial services group has been studying the family financial support of home buyers for seven years and confirmed that 2023 has had more support from families in purchases than in previous years. The help of family members beyond parents has changed the familiar term of “Bank of Mum and Dad” to the “Bank of Family” in describing the process of home buyers seeking help in gathering funds for a deposit to purchase. 

Home buyers are finding help from parents, grandparents, siblings, and other members of blended persons that make up modern families, including friends.

The average amount of financial assistance from family to home buyers is expected to reach £25,600 for this year with a total lending value of £8.1bn which is a large increase over the total family assistance of £5.3bn that was reported in 2016.

Family support will come or be needed by past home buyers, as homeowners are seeking assistance, too. Because there are homeowners that may possibly enter into negative equity and be out of reach of a remortgage, the Bank of Family could offer help to those homeowners to offer a funds to bring them back into positive equity levels and allow access to a remortgage.

Without family financial help, many first-time buyers would have to put off their dream of becoming homeowners. Inflation, higher average house prices, and more expensive interest rates are all putting pressure on home buyers that did not exist only two years ago. Then interest rates were historically low and helped make buying property more affordable despite higher asking prices.

The opportunity to work from home during the pandemic also helped home buyers as they could seek property outside the city and into areas that offered larger properties for less money or offered properties much cheaper than could have been bought otherwise.

Sometimes the support for home buyers came in other forms than financial, such as allowing family members to live with them while saving for a deposit. 

The current economic situation experienced by borrowers due to higher interest rates is not impacting only home buyers, but homeowners as well. It would be thought that once a home buyer obtained their property that interest rate changes would not impact them as homeowners, and that is why so many homeowners have been caught unaware when their mortgage term ended this year. 

There were thousands of homeowners that obtained fixed rate mortgages during the pandemic when the Bank of England’s standard base interest rate was almost zero at 0.1%. The Bank’s historically low rate resulted in lenders offering their own historically low mortgage rates. 

The months have passed for those home buyers and their two-year fixed mortgages have ended or will soon in the months ahead. Their historically low fixed rate will end, and they will be facing offered interest rates three or more times what they were used to paying. 

At the end of the term, homeowners will choose to remortgage or allow their lender to move them to their riskier and more expensive standard variable rate or SVR. A remortgage rate is likely much cheaper and choosing a fixed rate remortgage will shield against further rate hikes. Avoiding a SVR could save a substantial amount of money for a homeowner.

Shopping for a remortgage is quick and simple and by shopping online with a remortgage broker a homeowner could have numerous quotes in hand to review and compare from a variety of lenders. Brokers could also offer exclusive deals from lenders not offered directly from the lender to borrowers. Homeowners can also choose to visit individual websites to gather remortgage quotes.

The Bank of Family is surely going to prove important for many home buyers, but perhaps also help keep families in their homes should the change in interest rates cause affordability issues for homeowners. It might also be important to those in negative equity to move into positive equity so that remortgaging is possible. For some, it might simply be helping them afford their situation due to higher interest rates. Overall, it should provide peace of mind that those reaching out for help are not alone. The economy has been difficult for many, and luckily some have families capable of assisting.

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