Whose responsibility is it to help first-time buyers and what is on offer?
First-time buyers (FTBs) are the most important people in the property-buying chain. If they're not buying, deals fall through all the way up the property chain.
FTBs are currently finding it difficult to make it on their own in the face of tighter lending criteria and high (albeit falling) house prices, but there is help at hand.
Family support
Parents are increasingly helping children find a deposit for their first property, but that's not always possible and lenders have devised products that still allow parents to lend a hand.
Guarantor mortgages allow friends and family to give FTBs a step up onto the ladder by standing as guarantor to the loan in the event that the borrower cannot meet their payments. Or increasingly they actually become party to the mortgage and jointly liable for the debt.
For example, with Norwich & Peterborough's Lend a Hand mortgage, a joint loan is offered to the parent and child. The first-time buyer can borrow up to 75% of the required loan provided they can support it from their income (maximum income multiple of 3.75) and the parent 'tops up' the other 25% to a maximum of 1 times their income. In this instance both parent and child are legally responsible for repayment of the loan in full; however only the child has legal title to the property.
The Co-operative Bank and Bank of Ireland also enable close family relatives to guarantee FTBs' mortgage payments.
Skipton Building Society launched a mortgage last week designed to help FTBs with small deposits. Its 95% 'Mutually Exclusive' LTV deal, offers a guarantor-style arrangement and is available to borrowers who hold accounts with the society, or have family that do.
Instead of actually paying their savings into a mortgage account, borrowers and their family can keep the money separate but use it as security against the mortgage.
Offsetting
Family offsetting offers a different approach to helping your children buy their home. While it doesn't allow the FTB to borrow more money, offsetting enables them to pay off their mortgage more quickly or helps to reduce monthly payments.
An offset mortgage works by allowing you to offset savings against your mortgage debt, saving interest on your debt instead of earning interest on your savings.
The family offset feature allows parents to offset their savings against the child's mortgage, sacrificing the interest on their own savings in order to help reduce the interest charged on the mortgage.
Newcastle Building Society offers this feature and there are no restrictions to the number of family offset investment accounts that can be used against the mortgage, as long as the account holder is related by birth to the mortgage holder.
What about the State?
The Chancellor of the Exchequer recently announced that Stamp Duty will not apply to purchases of residential property of £175,000 or less for the next year, before the threshold will return to its £125,000 level. An extra 100,000 borrowers are expected to benefit from exemption this year, many of which will be FTBs.
The Government is also extending its Homebuy initiative, which lends money to FTBs to help them get on the property ladder.
Some have criticised the Goverment's plans for not doing enough but I think they're welcome and will have some impact.
Further initiatives
Developers are suffering badly this year and doing everything they can to help FTBs, in the interest of self-preservation as well as the greater good.
Housebuilder Persimmon Homes, and mortgage lender, Halifax, teamed up last month to offer first-time buyers a helping hand.
The Double your Deposit scheme doubles your savings (provided they are in a Halifax or Bank of Scotland account) up to £5,000 to use as a deposit on a Persimmon Home. So it will double £5,000 to £10,000.
Mortgages can be taken out from any lender and borrowers are permitted to add any other savings to the deposit. Although, of course, the deal is only of value if you want to buy a new home from Persimmon.
Many developers are offering `Stamp Duty Paid' schemes on FTB properties, in the knowledge that buyers would otherwise be negotiating greater discounts on the asking price anyway. At the moment the priority is on building interest from buyers and any incentive is helpful in attracting potential purchasers.
It's not an easy time for first-time buyers but there is a range of different lender, developer and Government initiatives on offer to help them get a foothold on the housing ladder.
Of course, the biggest source of help for many aspiring homeowners is still the family and the mortgage and housing industries will continue to develop schemes that help parents to help their own.