27th November 2024
As house prices remain high, home ownership may seem out of reach. However, there is a way you can get a head start.
Although the housing market lost momentum in 2023, due to increased mortgage rates and a lingering cost of living crisis, 2024 has proven to be a different story. Prices are remaining largely stable due to a subdued housing market. This, combined with the fact that incomes haven’t grown fast enough to keep up with the rising cost of living in the UK, plus higher interest rates (between December 2021 and August 2023, the Bank of England raised the base rate 14 times from 0.1% to 5.25%. This is its highest level since April 2008), means now is a difficult time to buy property, especially for young people and first-time buyers.
Our Head Start Mortgage provides a way for family members to help the younger generation buy a property. This mortgage allows buyers to purchase a property in their own name with a mortgage of up to 100% of the property’s value. This is done with the support of one or more family members who will provide security in the form of a cash deposit or a charge over their own home.
The key difference between a family assist and a traditional first-time buyer mortgage is the size of the cash deposit needed, with first-time buyer mortgages usually requiring 5-10% of the property value as a cash deposit. As the deposit acts as security, lenders will usually offer lower interest rates compared to family assist mortgages. However, for those who are struggling to gather money for a deposit, like those in rented accommodation, even a 5% deposit can seem out of reach, especially in areas of the UK where house prices are high.
As the mortgage doesn’t require a deposit, homebuyers are able to get on the ladder sooner than if they had to save. This could be particularly helpful for renters, whose money could instead go toward paying off their own property. Also, although a helping hand is needed to purchase the property, the homebuyers will have full ownership over the property.
For the family members helping the homebuyers, if they use cash as security, they’ll earn interest in a Vernon savings account during the security period. Furthermore, if the mortgage terms are met, they’ll get their contribution back after 5 years.
Are you interested in a Head Start mortgage? If so, you can find out more here or feel free to get in touch.