A family affair

But over the last decade, rising house prices have meant a generation of first-time buyers are having to find alternative means to raise the required capital and they are turning to their parents for help

David Wilson Holmes group managing director Bev Watson says buying your first home is rapidly becoming "a family affair".

She said: "The current position of first-time buyers can be traced back to changes in society which were not apparent 20 years ago. Back then, the accepted norm was to go straight to work after leaving college and live at home until it was time to get married.

"Now a large majority of first-time buyers have the added burden of student debt averaging £10,000 which reduces the possibility of saving money.

"Many are also unable or unwilling to move back home after university so end up lining the pockets of landlords instead of paying off a mortgage."

Bev added: "With stamp duty thresholds recently raised to £120,000, there is now greater opportunity for first-time buyers to make the move.

"But while these changes will help many, a growing trend also indicates more than half of all parents now expect to help their children get onto the property ladder."

She says the reliance on parental purchasing power is on the up because even though it might not be the best start towards financial independence, necessity demands creative solutions and this can be mutually beneficial.

She says for children it is an important step onto the property ladder and away from the rental market, while for parents it could represent greater financial security in the light of pension concerns and it could offer tax exemption ideas.

For parents with some money to spare, one option is to buy a property for your child so they can live rent-free while the income from their housemates covers the mortgage.

This is probably ideal for those whose children are doing a law or medical degree where they would otherwise be renting for four years or more, or perhaps for the young professional looking to live in an up-and-coming area.

One advantage of this is properties in student areas usually hold their value as a steady stream of tenants will always be available.

Bev says there are various ways of financing this but possibly the most tax-effective option is using a buy-to-let mortgage in the parent's name with the child as the landlord.

She adds the general rule is the bigger the deposit, the better, as it provides the first-time buyer access to a larger range of mortgage deals and better protection against falling house prices and negative equity.

Lenders will also levy a higher lending charge on loans over 90 per cent so ideally try to put down a minimum deposit of 10 per cent.

Many parents choose to help with the deposit but if the money is a loan, this could be liable for inheritance tax. If it is a gift it turns into a potentially-exempt transfer.

Bev concludes: "While there are various effective options which can enable first-time buyers to get on the property ladder, it is imperative to obtain financial advice beforehand to thoroughly understand what is on offer."

She said David Wilson Homes help many new buyers make the move as around 15 percent of all their homes fall under £120,000.

"For the growing number of parents who simultaneously want to assist their children and invest wisely in a nest egg for the future, keeping it in the family' is an opportunity to do something positive for both generations."

For further information on David Wilson Homes developments for first-time buyers call 0800 234455 or visit davidwilsonhomes.co.uk