In 2023, first-time buyers received £9.4 billion from the "Bank of Mum and Dad," according to Frances McDonald, Director of Residential Research at Savills. Approximately 164,000 first-time buyers relied on family support to step onto the property ladder. As mortgage rates remain high, this trend is expected to continue, making it challenging for first-time buyers to secure a home without assistance. However, McDonald predicts that the percentage of buyers requiring help from family will decrease slightly from 57% in 2023 to 54% in 2024. The full article by Ryan Fowler was published in The Intermediary on August 19th, 2024.
Tina Khanna, RG Law's conveyancing director, points out the frustration parents experience when their source of funds is scrutinised. She explains, "Parents often believe they can simply gift their child a lump sum, but we must verify the source of that gift, which complicates many transactions." Common objections include resistance to identity verification and reluctance to provide bank details or pay additional fees for the necessary checks.
To minimise these issues, Khanna advises clients about the legal requirements involved in gifted deposits as early as possible. Many clients are unaware that their lender needs to be informed of the gift and that parents must provide a letter confirming the money is a gift, not a loan, with no expectation of repayment.
Additionally, Khanna warns parents about the importance of ensuring their child enters a 'declaration of trust' when purchasing property with a third party. She notes, "I've seen many cases where young people, who start as close friends, end up selling the property within a few years and struggle to reclaim the deposit their parents provided. Without a declaration of trust, recovering those funds can be difficult, as it depends solely on the other party's integrity." It makes sense to have that certainty with a declaration of trust.
Commentaires