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Savings raided to secure first time buyer mortgages

26 October 2009 / by Andy Davies

A quarter of parents have said they are willing to raid their savings in a bid to help their children buy their first home.

With houses prices being at their most affordable rate for six years, Lloyds TSB has found that 70 per cent of parents with children over the age of 18 believe now is the right time for their children to get on the property ladder.

One in four of these parents said they are willing to use their savings to help fund the deposit for their child's first home, while the average amount saved by parents looking to offer financial support to their offspring totals £41,000.

Since the banking crisis took hold in 2008, there has been a decline in the number of first time buyers – with figures for January 2009 indicating that there were 8,600 first time buyers. This figure has now risen to 19,200 for August, and in the second quarter of 2009, fist time buyers accounted for two in every five house purchases.

However, while many parents are keen to help their children take full advantage of current market conditions, only eight per cent of parents believe they have saved enough money to help their children secure a mortgage. Meanwhile 14 per cent admitted more needed to be saved and 20 per cent said that they would provide financial support but their children would also need to make a contribution for the deposit.

Meanwhile, parents with more than one child also placed great importance on supporting each child equally, with 93 per cent saying they do this. Of those who do not intend to provide equal financial support, 60 per cent cited differing wages between their children as the main reason.

Commenting, Stephen Noakes, commercial director of mortgages at Lloyds TSB, is not surprised by these figures.

"The current housing market presents a real opportunity for first time buyers, as long as they are ready to buy with a deposit. Housing affordability is back to the level it was in 2003, so many parents with grown-up children want to help them take advantage by using their savings," he said.

In an attempt to make getting on the housing ladder more attainable for first time buyers, Lloyds TSB has launched a three year mortgage called 'Lend a Hand', offering a 95 per cent LTV at a rate of 4.99 per cent, with parents using their savings as a form of deposit.

Mr Noakes explains: "Lloyds TSB's Lend a Hand mortgage lets parents use their savings without actually having to write their children the cheque. Their deposit is held in a savings account paying a competitive rate of interest and, after three years, they are free to use their savings again as they wish, maybe to help their next child buy their first home."

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