Last Updated on 23.9.21 by Gorvins
With house prices on the rise in the UK, the ‘Bank of Mum and Dad’ is being called upon by homebuyers needing a helping hand onto the property ladder. Last month the Office for National Statistics revealed that house prices had risen annually by 5.7% across the country – that’s around £1000 a month over the past year.
The national average home price is now £277,000 across the UK with that figure varying from region to region. For example in Greater Manchester, the house price average is £163,754 with a high percentage of sales being attributed to first time buyers (FTBs), whereas in London it is an eye-watering £513,000 which not many FTBs would be able to afford.
The rises are making it increasingly more difficult for first time buyers to get onto the market of their own accord even with the help to buy schemes. Although the average FTB price is smaller, the affordable housing scheme is still proving to be not so affordable for most – see our affordable home crisis blog for more info on this.
Mum and Dad to the rescue
Even though properties are increasing in price, the demand for housing isn’t declining; hence mum and dad stepping in to help first timers, and even some experienced buyers, get that all important deposit together.
According to recent analysis, 64,000 properties were purchased over the last 12 months where buyers have relied on a gifted cash for all of or part of their deposit. This number equates to around 1 in 20 home completions, rising from the figures in 2014. With these such transactions on the increase, homebuyers need to know what to do with this gift and what to tell the conveyancers.
Putting your gifted deposit to good use – alert your conveyancer early
Conveyancing is the legal aspect to buying or selling a home. Legal checks must be carried out to conform to anti-money laundering rules, which includes where your gifted deposit has come from.
To make this process as efficient as possible, tell your conveyancer at the earliest possible opportunity after an offer has been accepted. You will have to provide evidence of where the money comes from to prove that it was earned legitimately. It is a requirement from both the giver and recipient and may include:
- The necessary bank statements
- Detailed summary and evidence of how the money was accrued
You will also want to make sure that paperwork from the ‘bank of mum and dad’ – or whoever is giving you the deposit – is signed and ready to go. This ensures that all interested parties, such as mortgage lenders, know that the cash is a gift and not a loan.
An important point to note, albeit being slightly obvious, is that if you have received a gifted deposit of any figure, once you complete the conveyancing process you will have no access or rights to the money!