Parent-guarantor mortgages on the rise for first-time buyers

Remember how you used to be able to get a lone or a mortgage, by having a guarantor, well results from a recent survey suggests that almost one-quarter of all parents planning to help their children buy their first property would act as guarantors for their children in order to get them onto the housing ladder.

The survey was conducted by Family Investments, they found that 24 per cent of parents plan to help their children get onto the housing ladder by acting as guarantor, compared to two-thirds of those who plan to just give their children the money outright.

Earlier research from Lloyds TSB has indicated how the so-called Bank of Mum and Dad is evolving.

It is no longer simply a case of parents chipping in with a cash loan to help their first-time-buyer children – now two-fifths of those taking their second step on the property ladder are turning back to their parents for financial assistance. The Family Investments survey shows that this evolution also includes parents putting the equity in their own homes on the line too, rather than simply handing over the cash.

The report also found that more detailed knowledge of guarantor mortgages was low among the 53 per cent who had heard of them – when asked a series of true or false questions about the characteristics, just under half of respondents were able to correctly identify the right answer every time.

Of the 529 parents who responded, only four noted that they had received support in the form of a guarantor mortgage from their own parents. This is especially significant and highlights the change happening in today’s mortgage market, where first time buyers can only get high LTV mortgages with some form of additional guarantee.

The Family Investments research also highlighted just how important the Bank of Mum and Dad is as a lender in the current climate. Of the non-homeowners questioned over a third are planning to buy and nearly a third of these expect their own parents to help in securing a mortgage.

The head of Savings and Investments at Family Investments, Kate Moore, commented: “It’s obviously becoming increasingly difficult for young adults to get onto the property ladder. As it becomes harder for young people to save enough for a deposit on their first home, parents have to consider other ways of supporting their children into the future.

If you need help and advice on buying your home or looking to invest then take a look at our services, we are set up to support service personnel, call us on 0300 1111 239 and speak to an adviser who can help.

20% of borrowers focus less than a week researching their next mortgage

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Results from research indicate that one in five UK homeowners about twenty per cent spend a week or less looking into mortgage products before they make a decision to buy.

Almost half of borrowers forty nine per cent spend a month or less on research. This is despite the fact that a mortgage is likely to be the largest financial commitment many people make in their lives.

The research was carried out in connection with the launch of the new Mortgage Service from a major UK mortgage provider.

AFVE wants to help borrowers better understand the options available to them when finding their next mortgage, and to ultimately save them time, money and hassle when making decisions on mortgage products.

Mortgage advisers work to remove the stress associated with researching and applying for a mortgage, and ensure that borrowers receive all the information and advice they need to help them make informed decisions. With the number of products currently available, the importance of getting independent mortgage advice cannot be underestimated. This is especially true given the current market conditions of reduced lending and more stringent criteria. Although strict lending criteria makes it more difficult for many borrowers to get a mortgage, it is important that buyers find a product which best suits their specific circumstance and don’t settle for second best.

The results of the survey highlight a bemusing approach to how people select their next mortgage. A mortgage is likely to be the largest financial commitment many will make and yet one in five buyers are happy to spend less than a week considering it. The mortgage market can be extremely complicated, and a ‘one size fits all’ approach won’t be suitable for everyone. Providing access to a national advice service will allow borrowers to experience a better way of finding their next mortgage, and ensure their individual needs are properly met.

To make sure your needs are met why not call our team now on 0300 11 11 239, let us do the hard work for you.

First-time buyers in Scotland hits post-crunch high

The number of first-time buyers in Scotland rose to the largest annual total in four years, according to new data released today by the Council of Mortgage Lenders in Scotland.

A total of 19,000 first-time buyers purchased a property in Scotland in 2012, an increase of 13 per cent on the previous year.

Meanwhile, in the fourth quarter of last year lending to first-time buyers rose to 5,200, up by 18 per cent on the same period in 2011.

By value, loans to first-time buyers totalled £490 million in the fourth quarter, up from £460 million in the previous quarter and £400 million in the fourth quarter of 2011.

In the fourth quarter 62 per cent of first-time buyers bought a property for less than £125,000 compared to 39 per cent in the UK as a whole.

First-time buyers also borrowed less relative to their income than in the UK overall, and spent a smaller proportion of their income on mortgage payments. First-time buyers in Scotland typically borrowed 2.88 times their income, considerably lower than the 3.26 times borrowed by their counterparts in the rest of the UK.

While there was an increase in lending to first-time buyers in Scotland, there was a fall in lending to home movers in the fourth quarter for the second consecutive quarter. A total of 7,100 loans were advanced to home movers, compared to 7,300 in the third quarter and 7,200 in the same period in 2011.

Despite the slight easing in the second half of the year, there was a small increase in lending to home movers for 2012 overall. A total of 27,600 loans were advanced to home movers (worth £3.66 billion) up marginally from 27, 500 loans (worth £3.6 billion) in 2011.

As a result of the increase in first-time buyer activity but slight fall in loans to home movers, overall house purchase lending rose slightly in the fourth quarter.

Following a similar pattern to the UK overall, remortgage lending increased in the fourth quarter when £700 million was advanced – a 6 per cent increase compared to the third quarter but still 20 per cent lower than the fourth quarter in 2011.

Overall, a year-on-year fall in each quarter resulted in a 19 per cent fall in remortgage lending in 2012 compared to 2011.

Chair of CML Scotland, Iain Malloch, was reported to have commented,: “The Scottish housing market showed positive signs of recovery in 2012, broadly following the pattern seen in the rest of the UK. The availability of mortgages at more than 90 per cent loan-to-value has more than doubled in the last two years and lenders expect to offer more, high loan-to-value mortgages this year. This, and the fact that the number of first-time buyers is at a post-crunch high, suggests that lenders really are open for business.”