houses

Could end of Help to Buy mortgages mean greater pressure on parents?

Could the end of Help to Buy mean greater pressure on parents?

Parents with grown-up children living at home could soon find it harder to get them on the property ladder thanks to the end of Help to Buy mortgages.

The Government confirmed in October that its Help to Buy mortgage guarantee scheme will close to new applications on the 31st December 2016.

Launched in January 2014, the scheme helped lenders offer 5% deposit mortgages to buyers with smaller savings. The Government took on some of the risk if borrowers defaulted. Over 86,000 households have used the guarantee to buy a home since its launch in 2013*.

But with the scheme coming to an end in a matter of weeks, borrowers with smaller deposits are concerned they may start to struggle to find mortgages that they are accepted for, or can afford, again.

Have you benefitted from house price increases?

If you are a parent or grandparent wanting to help loved ones on to the property ladder, then you could consider unlocking some of the cash from your own home to gift or lend the required deposit for a mortgage.

House prices have soared in recent years, and many of us in or approaching retirement have benefitted from the increases, particularly in the last twenty or so years.

The average house price in the UK has increased by £152,338 over the last 20 years*, from £54,008 in 1996 to an average of £206,346 today. By tapping into this available equity, you could unlock some of the tax-free cash required to help your loved ones to purchase a home of their own.

Downsizing is one option, of course, but not everybody wants to sell or move away from the home they love in later life. The move can be stressful, and there can be significant costs involved in moving house.

Could equity release provide the deposit required?

For those not wishing to downsize to free up some of the equity from your home’s value, equity release plans offer a varied and flexible way to access the money tied up in your bricks and mortar.

In a recent survey by Aviva, 31% of homeowners aged 45 and over planned to give money to their children to become a first-time buyer.

With Help to Buy coming to an end and halting the plans of potentially thousands of prospective home buyers, arranging a lifetime mortgage could be a way for older homeowners aged 55+ to assist our loved ones onto the ladder, without having to sell our own homes in the process.

Equity release plans have really evolved in the last few years. Today, some of the plans allow you to make regular or one-off payments to reduce or prevent the interest that would otherwise accrue on the loan. Others enable you to protect a percentage of your home’s value to guarantee an inheritance is left for your loved ones when you pass away.

With a great deal of options to choose from, it is always recommended to seek the guidance of an independent specialist in retirement lending before making a decision.

Your Bower specialist will take the time to explain everything thoroughly, including how equity release will reduce the value of your estate and how it may affect your entitlement to some state benefits. If you choose to go ahead, we can take care of everything for you.

Speak to us today to arrange your free, no-obligation initial consultation on 0800 411 8668.

*MoneySavingExpert

**Nationwide House Price Index