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First time buyer's parents don’t always know best

First time buyer's parents don’t always know best

Category: Mortgages

Updated: 19/10/2010
First Published: 19/10/2010

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

First time buyers who turn to their parents for mortgage advice might find they are in a better position to buy their first home than they think.

Despite first time buyers increasingly having to rely on the so-called 'Bank of Mum and Dad' to help them onto the property ladder, a new survey from Halifax has revealed that parent's knowledge of the mortgage market might leave a little to be desired.

Innovations in the mortgage market over recent years have meant that there are now a number of mortgage products designed with first time buyers in mind.

However, the research revealed that awareness levels of these products amongst many parents remain limited.

Only around one in five had heard of guarantor mortgages, while only just over a quarter knew that a mortgage could have multiple applicants, such as friends and family, in order to help spread the monthly costs.

Meanwhile, around four in five parents believe that it is more difficult for their children to buy their first home than it was for them, even though recent data suggests that monthly mortgage payments as a percentage of monthly income are currently more affordable than they have been compared to the average of the past 25 years.

Yet despite this apparent lack of knowledge, over half of parents of potential first time buyer children said they were not willing to take financial advice to ascertain how best to support their children's home purchase.

Although first time buyer mortgages are not as easy to come by as they once were, it is still possible to find some competitive first time buyer deals.

For instance, Yorkshire Building Society has a number of mortgage deals available to borrowers with only a 10% deposit, while first direct and Northern Rock both have deals open to those with a 15% deposit.

Mortgage brokers such as Mortgage Solvers also have the expertise and product knowledge that could make the difference between first time buyers managing to secure a mortgage deal or not.

"The bank of mum and dad is an important crutch for many first time buyers, yet our research demonstrates that parents aren't as savvy as they could be when it comes to deciding how best to help," said Stephen Noakes, Halifax's commercial director for mortgages.

"Times have changed; traditionally first time buyers turned to their parents for a hand-out but, for many, giving a deposit or paying off debts is not financially viable.

"Whilst it's important that first time buyers understand everything that is involved in buying a home, for many parents getting a better understanding of the state of the market and the range of products available today may make a difference to homebuyers and parents alike."

For couples taking their first step onto the property ladder, the importance of arranging life insurance cover should not be overlooked either.

A broker such as LifeQuote can quickly and easily help you find the most competitive life insurance deals to make sure your family is protected should the unthinkable happen.

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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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