Opinion: Important advice for the Bank of Mum and Dad – do your research and think about what your child wants, too

 
Camilla Dell
What, darling, you can't get to your house without falling into a cloudy abyss? Oh, yes, I see.

Rising house prices, together with stagnated salary inflation, have meant that more first-time buyers are struggling to afford to get onto the property ladder.

The problem is particularly acute in London, where Hometrack data shows current property values are 85 per cent higher than they were eight years ago. As a result, they’re turning to the “Bank of Mum and Dad”; the average handout per child in London now amounts to £24,800.

So far this year, 20 per cent of our clients have been buying for their children and we predict this will increase by 10-15 per cent over the next two years. For those who plan on helping children financially, the first thing to work out is affordability.

Read more: What we need to do to protect housebuilding after Brexit

Some parents will have savings, but others will need to borrow to help their children out. There are several ways to do this, but the most popular is remortgaging and applying for a loan. Whatever option you decide, it’s a good idea to seek independent financial advice first.

For parents who want their children to repay the loan at some point in the future, drawing up a loan document is relatively straightforward, setting out the repayment terms and any interest, but it needs to be signed by both parties.

Commonly, parents buying for children prefer two-bedroom homes, within close proximity to good transport links and other amenities. These offer a good future investment, due to their broad appeal either for buy-to-let, first-time buyers or professional couples.

As for location preferences, they aren’t too dissimilar to those favoured by first time buyers; Ladywell in Lewisham is proving particularly popular at the moment; we recently bought a two-bedroom property there for a client for £370,000, and it’s within easy reach of the train station with good links into central London.

While there is a demand on new builds from first time buyers with parental help, we are seeing more of an interest in second hand properties, which are often less expensive due to the premiums often attached to new builds.

With so many ways to help your child get onto the property ladder, it’s important to put the research in and review all potential risks and benefits. Discuss them with your son or daughter before buying and remember that you need to find an arrangement that suits their needs as well as your own.

Black Brick is an independent property buying agency. For more information, visit black-brick.com

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