Help from parents is the key for first-time buyers in Cornwall

Parents in Cornwall are proving to be lynchpins in the fight by young people to get onto the property ladder.

Mortgage borrowing by house buyers showed a marked improvement in the last quarter, and Cornwall-based independent financial adviser, Worldwide Financial Planning, believes it is help from mum and dad that is making the difference in the county.

Ronan Marrion is a mortgage specialist with Worldwide. He said: “Mortgage lenders are requiring a deposit of at least 10 to 15 per cent and the rates only start to improve significantly if borrowers can put down a deposit of 25 to 30 per cent. Most young people and first time buyers just can’t find that sort of money, so we are seeing more and more parents step in to help out.

“Family support has become a vital resource for anyone wanting to buy a property in Cornwall.”

Suzie Smith, 32, from Newquay, managed to buy her flat with help from her parents. She said: “My parents decided to step in and help me out after I had lived in eight different properties in eight years. They remortgaged their own home to provide me with a deposit to buy my flat. I’m so grateful as I don’t think I would have ever been able to save enough money to buy a property otherwise.

“I’ve got several friends in the same situation as me who’ve been lucky enough to receive help from their parents. Some of my friends are married, have two incomes and still couldn’t afford to buy their own property without help from their families.”

Anna Lee, 25, from St Austell, has a similar story: “I bought my house with my ex-boyfriend and it was his parents who provided the deposit; we agreed to pay the deposit back if we ever sold the property. We’ve since split up, but have decided to keep the house and rent it out until the housing market improves. We both realise that otherwise we have very limited options when trying to get back onto the property ladder.”

Bradley Start, partner of Newquay-based estate agency, Start & Co, said: "Generally speaking the first time buyer market has perhaps been one of the worst hit in this recession. With mortgage availability in such low supply, high levels of existing consumer debt and little job security, first time buyers have struggled to save enough of a deposit to satisfy increasingly stringent lender criteria. As a result of this, those buyers that have entered the market have seemingly relied more and more on the bank of mum and dad to provide either a deposit, a deposit top-up or stand as guarantors.

“We have also seen an increase in parents with much younger children buying property to rent out now with the sole purpose of getting their children a property for their future. As the divide between income and house prices has continued to widen over the years, many parents believe it will be virtually impossible for their children to buy houses in the future.”

Alistair Whyte heads up the Residental Property Team at Coodes Solicitors has the following advice for parents planning to lend deposits to their children:

"We have seen an increase in first time buyers reliance upon parents for their deposit both parents and children need to carefully consider and agree whether the deposit is a gift, a loan or means that the parents will have a share in the property being bought. 

“Better to agree this at the time of purchase than argue at significant cost in the future. The parents and the children should take legal advice well before a house is found and mortgage application made as lenders also need to be told of the arrangements.”

The Council of Mortgage Lenders (CML) saw loans made to homebuyers rise by 25 per cent in February and March. The borrowing by first time buyers has also rebounded faster than that by existing homeowners, according to the CML.

Mortgage specialist Ronan said he is definitely seeing that reflected in the Cornish housing market: “Since the start of 2010 things have really improved and there is a lot more confidence surrounding property purchases. The market hasn’t looked this optimistic since June 2008.”

Buy-to-let properties are also becoming popular again in Cornwall with small business owners making the most of the current low house prices.

Worldwide’s managing director, Pete McGahan, said: “The buy-to-let properties are being bought by people who live in Cornwall, not second home owners from out of the county.

“We’re seeing farmers and builders take advantage of the housing market by investing in a property that they can then rent out.

“There is also a better return for your money now as in a property previously worth £200,000 that had a rental income of £700 per month may now only be worth £140,000 but has the same rental income. In relative terms buy-to-let properties are proving much better value for money.”

 Worldwide Financial Planning provides independent advice on all types of mortgages. For more information on buying a property in Cornwall, contact Ronan Marrion on 01208 816667 or visit www.wwfp.net.

Posted 8th Jun 2010  by member mpad