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Rising house prices and an inflated rental market have made it much harder for today’s generation of first-time buyers to save for a deposit, with many people nearing mid-thirties before they can afford to get onto the property ladder.
More than half of first-time buyers said raising the funds for a deposit was by far the biggest barrier to homeownership. As a result, many first-time buyers are reliant on the generosity of parents to help them reach their deposit amount. In 2021, the total ‘Bank of Mum and Dad’ contributions were predicted to reach £9.8 billion.
As the appetite for homeownership amongst younger generations remains high, so does the need for more ways in which parents and grandparents can lend their support.
Equity release is one of the options available to over 55s, with products like lifetime mortgages growing in popularity following multiple product reforms to ensure consumer protection. As a result of ‘no negative equity guarantee’, flexible product features and average interest rates in 2021 as low as 3.95%, perceptions are shifting.
These are just a few examples of how equity release products can help younger generations get onto the property ladder. While later life mortgages have their benefits, they are not without their risks.
A lifetime mortgage is a loan secured on your client’s home and interest is charged on the total loan amount, plus any interest already added. The loan is usually repaid when the last remaining borrower dies or moves out of the home into long-term care. Your client may wish to pay some or all of the interest charged each month to reduce the overall cost of the loan. It may also affect any means-tested benefits your client is entitled to, and if your client has more affordable ways of borrowing available, these should be considered first.
Whether you’re new to the market or looking to brush up on your existing skills, we have a range of CPD accredited workshops and webinars created for advisers.
This website is designed to give professional financial advisers information and tools that they can use to help control and develop their business and should not be relied upon by private investors or any other persons.