Can your brother or sister help you buy a home?

Brothers and sisters are now more likely to offer financial support to first-time buyers than grandparents, according to data from Hamptons estate agents and Skipton Building Society.

So far in 2023, siblings have accounted for 11% of all family aid given to first-time buyer deposits in Great Britain - more than double that recorded five years ago (5%).

Here, Which? looks at how much family support first-time buyers are securing, how much difference it makes, and what the alternatives are if you need help buying your first home.

How much money are family members offering?

But this share (72%) has gradually declined from a peak of 80% in 2018, with first-time buyers increasingly looking to other family members for help.

Siblings (11%) are becoming an increasingly important source of funding and are the next most likely to offer a helping hand. Hamptons says those 'at the more affluent end of the spectrum' are the ones putting their hands in their pockets.

The median deposit boost gifted by siblings is £10,250 - that's £5,000 lower than the sum given by parents.

The table shows how varying family members have contributed to first-time buyer purchases in Great Britain this year.

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How family support differs by region

One in three (32%) of those trying to get on the housing ladder receive financial aid from their family.

First-time buyers purchasing in Yorkshire & Humber are most likely to have additional support (40%).  Given that homes here are more affordable than average, family members are more likely to be able to contribute towards what’s likely to be a smaller deposit in cash terms.

Buyers in Scotland had the lowest proportion of family help (27%), while those in London received the biggest financial boost from family members, taking on an additional £34,270.

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What difference does family support make?

Overall, the average family gift given to first-time buyers so far this year is £14,220. That's a 2% rise from the year before.

Charlotte Harrison, home financing CEO at Skipton, said: 'For many, despite potentially being able to pass a typical mortgage affordability check – it’s the lack of a deposit that’s holding them back from their home ownership aspirations.

'Support is a real boost to first-time buyers’ purchasing power, giving them a head start onto the property ladder much earlier than what they’d have achieved on their own.'

Bigger deposits and cheaper rates

According to Hamptons data, over a third of first-time buyers with backing put down a 20%+ deposit - double the share of those purchasing without family support.

A bigger deposit opens up the potential for cheaper mortgage rates. For instance, the cheapest current rate for a two-year fix after putting down a 20% deposit is 6.04%, while the best rate for a 5% deposit is 6.44%. 

For someone buying a £260,000 home and repaying their mortgage over 25 years, that equates to an annual difference of £768.

Increase spending potential

The data shows how family help tends to mean first-time buyers can purchase a more expensive home. 

The average first-time buyer who had family support paid £257,290 for their home this year. That's £6,500 more than someone without additional contributions.  

Buy at a younger age

Hamptons figures show how family support allows first-time buyers to purchase sooner.

The average first-time buyer with a deposit boost is 31.3 years of age, compared to 32.5 years for someone who goes it alone.

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What to be aware of when gifting a deposit

Gifting a lump sum is the most popular option when it comes to families helping first-time buyers.

The lender may require a letter from you confirming that you don’t expect the money back, and the conveyancer might request bank statements from you as part of their money-laundering checks.

What are the alternatives to gifting money?

If you don’t have a lump sum at hand, there are a range of different ways families can help.

Whatever you opt for, your decision shouldn’t be taken lightly as each of these options can have a big impact on your finances. It’s worth taking expert advice before committing to anything. 

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What if you can't get family help?

Two thirds of first-time buyers don't receive financial support from family members, according to Hamptons research.

For those going at it alone, there are buyer support schemes aimed at helping people get their first home.



source https://www.which.co.uk/news/article/can-your-brother-or-sister-help-you-buy-a-home-azcBk1X1yPcA
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