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Generous grandparents hand out £37bn

The Bank of Gran and Grandad has lent more than £37 billion to their grandchildren, according to a study.

Insurance company Saga polled 5,529 grandparents and found that the average donation was £9,365.

Grandchildren in London and the South East received the largest deposits, while grandparents in Yorkshire were the most likely to donate.

More than half the grandparents would prefer seeing their relatives spend the money rather than leaving it as inheritance.  

40% said they were happy for the money to be spent on whatever the recipients liked, with other grandparents earmarking cash to go towards:

  • education (23%)
  • holidays (13%)
  • driving lessons (12%) 
  • house deposits (9%).

Alex Edmans, head of product at Saga Money, said:

“Most of the money grandparents are gifting is coming from their cash savings, so whatever small amount of interest they are missing out on is clearly outweighed by the joy they get by seeing their grandchildren benefitting from the money.

“Our customers are increasingly turning to gifting money through equity release in order to help grandchildren onto the property ladder.  On average they take £33,000 out of their property in order to give to family.”

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Over a million save into Help to Buy ISA

Over a million people have now opened a Help to Buy ISA, with first-time buyers saving around £1.8 billion into their accounts.

The Help to Buy ISA scheme launched on 1 December 2015 enabling aspiring homeowners to save up to £200 a month towards buying a property worth up to £250,000, or £450,000 in London.

Once they’re ready to buy their first home, savers will benefit from a 25% government bonus which can be worth up to £3,000.

Those looking to purchase a home with a partner can open separate ISAs and claim government contributions to put towards buying their first property together.

The scheme has grown since its introduction almost 2 years ago, with the equivalent of 1,500 Help to Buy ISAs being opened every day. 

First-time buyers will be able to open a Help to Buy ISA until 30 November 2019. 

For existing account holders, they can continue saving into their Help to Buy ISA until 30 November 2029 when additional contributions will close.

Government contributions can be claimed until 1 December 2030.

Stephen Barclay, economic secretary to the Treasury, said:

“Reaching the landmark of 1 million Help to Buy ISAs shows the product’s success in helping first-time buyers save towards a home.

“Our Help to Buy schemes continue to prove hugely popular across the country as we support people to get on in life and achieve their dream of climbing the housing ladder.”

Contact us to discuss purchasing your first property.

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Landlords hit by mortgage interest relief changes

Landlords with a single property could be pushed into a higher tax bracket due to changes to mortgage interest relief.

The National Landlords Association (NLA) polled 754 landlords and found that 16% with a single property said they will move into a higher income tax bracket – a 7% increase from Q4 2016.

Changes to relief on finance costs on residential properties was brought in on 6 April 2017, restricting costs to the basic rate of income tax.

These include mortgage interest, interest on loans to buy furnishings and fees incurred when taking out or repaying mortgages.

This means that landlords will only be able to deduct a share of finance costs when calculating rental profits.

This is being phased in over 4 years:

Tax year Percentage of costs deducted from profits Percentage of costs available a basic rate reduction
2017/18 75% 25%
2018/19 50% 50%
2019/20 25% 75%
2020/21 0% 100%

NLA estimates that a landlord with a single property would need to increase rent by more than 11% to continue getting the same yield from the property. This equates to a rise of £116 per month for the average rental property. 

Richard Lambert, chief executive officer at the NLA, said:

“Single property landlords are responsible for providing a huge proportion of the UK’s private rented homes, and these findings show that, slowly, more and more are waking up to the fact their tax bills could be significantly higher in the coming years.”

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Homeowners rely on parents to move up property ladder

More than a third (35%) of homeowners rely on financial help from family and friends to move up the property ladder, according to Lloyds Bank.

Out of 525 people surveyed, 32% need an average of £21,231 from their parents to secure their next home.

9% would borrow money from their grandparents, while 6% would borrow from friends.

Of those who need financial support, 47% believe their parents would have to cut back in order to help them move up the property ladder.

63% plan to use the equity from their current property to get the deposit they need to move and 41% would use their personal savings.

Homeowners also spoke about what delayed them from purchasing their next home:

  • not finding the right property (32%)
  • lack of affordable property available (26%)
  • the cost of stamp duty (24%).

Andy Mason, mortgage director at Lloyds Bank, said:

“Parental support continues to play a vital role in helping young people to get on the property ladder. However, it is clear that despite improved conditions for this part of the housing market, ‘second steppers’ will still rely on the BoMaD, with hard-pressed parents being once again called on for financial help. 

“Without this extra financial support, second steppers believe that they wouldn’t be able to make the next move on the property ladder for some time.”

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Almost a million savers benefit from Help to Buy ISA

The Help to Buy ISA has helped more than 960,000 people save towards buying their own home, according to the latest government figures.

The scheme, which was launched in December 2015, has helped 240,000 first-time buyers get on the property ladder.

The Help to Buy ISA allows individuals to save up to £200 a month, with a potential government bonus of up to £3,000 on offer. A deposit of £1,000 is needed to open an account. 

Since its launch, 62,528 home completions have been made, while 86,128 bonuses were paid– with the average government bonus paying out £625. 

41,754 completions were made by individuals aged 25 to 34. 

The North West (8,642), Yorkshire and the Humber (6,565) and the South West (5,931) saw the highest number of home completions. 

The average value of a property purchased through the scheme was £170,464, compared to the average first-time buyer house price of £182,000 and the national average price of £216,000. 

Stephen Barclay, economic secretary to the Treasury, said:

“We want to make sure that anyone who works hard and aspires to secure their own home has that opportunity.”

Alok Sharma, housing and planning minister, added:

“As set out in our Housing White Paper, we’re committed to helping those aspiring home buyers currently locked out of the market to turn their home ownership dreams into reality.”

Contact us to discuss purchasing your first property.