Even before the Covid property boom, UK house prices have been steadily and heathy increasing over a long-term period. In fact, since average house price tracking began back in 1983, the average house price has increased by over 425% (over 100% with inflation)! However, with the consumer price index showing the highest rise in 30 years, should you still be considering your first property purchase?
Well, it’s certainly something you should still strongly consider. Even if house prices start to slow, the long-term picture is very much one of growth. This is supported by the UK housing markets historic performance as well as an insatiable demand and a wide range of government backed incentive schemes and mortgage products still on offer.
The fact is, the longer you leave it, it’s only going to get tougher. As mentioned already, there are many schemes available to help first time buyers. Furthermore, as inflation takes a grip and the cost of living; in terms of energy, food and a whole host of other day to day consumables, eats further into our wages, there are now competitive, longer fixed term mortgage deals to enable you to know what your mortgage payments will be for up to 5 years and some of these have better interest rates than some of the 2 - year fixed deals!
For example, ‘The Halifax’ is offering a 2.48% 5 - year fixed deal which is 0.6% better than its 2 year fixed deal! Whilst this might not sound much, on a £300K mortgage with a 40% deposit this makes a saving of £42 a month. There are even fixed 10 - year deals at competitive rates – although we think that a decade is bit too long a period to fix.
The problem you are most likely faced with is that both the general cost of living and house prices are going up whilst wages remain largely static OR certainly not climbing as the same rate of inflation. This means that for many, the deposit target keeps moving further and further away.
So - besides government help schemes as well as such things as ‘Lifetime ISA’s’ to help you save more effectively, what else could you consider? Well, it might well be worth talking to your parents.
Whilst some parents jump at the opportunity of helping their ‘offspring’ get on the property ladder there are those, much like my own parents, that would simply go lightheaded and ‘faint’ at the prospect! The trick therefore is maybe not to ask right out for a considerable sum of money BUT to present them with a proposal that makes all round common sense and helps to protect their estate, that they’ve spent a lifetime building, from the Chancellor!
If it’s a single parent, the Inheritance Tax (IHT) threshold of their estate will be £325,000. Anything over this amount means that their estate is liable to 40% IHT when they pass on. If both your parents are still with you they could have a combined estate IHT threshold of £650,000. Whilst in both instances, these sound like a considerable sums of money, the fact is that with the escalating property values that we’ve been discussing – along with any other savings, investments and possessions, these thresholds can often be easily reached. This can especially be the case if they have second homes, such as a holiday home or even buy-to-let investments.
The reality is that, if your relationship with your parents is good, the probability is that they would wish you to fully benefit from their estate, after they’ve passed. The problem that could arise is that if they haven’t recently re-evaluated their estate and made a new Will, a large portion of their estate could find its way to the Chancellor rather than you and any other siblings you might have.
Your parent(s) can reduce their IHT liability by helping you out early with an inheritance in the form of a financial ‘gift’ to help you with your deposit. This means that a greater percentage of their inheritance remain within the family and furthermore, its money well invested and will present a good return – given the right kind of property.
