The ‘bank of mum and dad’ is no longer offering interest-free loans, a new survey has found.
First time buyers (FTBs) face a tough leap getting on to the property ladder and often turn to family members to help raise the cash for a deposit.
While this commonplace, a new study from HSBC has revealed that three quarters of families expect to be paid interest on top.
The survey of more than 1,000 FTBs revealed that more than half of family members help financially towards the deposit.
Just 31% of families who offered financial assistance to their FTB relatives gave outright cash gifts as the primary source of family finances.
Even less than this (17%) requested part-ownership of the property in order to get their money back when the house was eventually sold on.
Almost one in five (19%) first time buyers received family financing in the last year.
Women are slightly less likely than men to be asked to pay interest on the loan they take out from the bank of mum and dad (70% versus 77%).
“Family support has become an important part of the first-time buyer financing mix, however the research shows that many relatives would like to be repaid at a later date,” said Peter Dockar, Head of Mortgages at HSBC.
“To avoid unnecessary strain on relations further down the line it is best to agree the terms with family members at the outset. Whether first time buyers receive financial support or not, we will continue to offer accessible mortgages at competitive interest rates.”
Making cutbacks and budgeting is the most effective way to manage your finances. Unfortunately, however, budgeting is not always enough. Loans for Young People are available to help keep on top of things.
As with any form of borrowing, it is important to ensure that you are able to meet repayments and fully understand the terms and conditions attached to your loan.