The study, which looked at mortgages issued between 2015 and 2017, said that of every 100 homeowners under the age of 30, 16 received parental help, and that figure rises to one in four for those under 25[1]. And according to research by Savills[2], help from family members supported 32% more transactions for first-time buyers in 2022 than it had back in 2010.
Protection for lenders
As the behaviour of borrowers has changed, and gifted deposits have become much more common, we have adapted our Insolvency Act covers to ensure they address the concerns of lenders; namely that when a parent provides all or part of a buyer’s deposit, the lender’s security is at risk if the parent is subsequently declared bankrupt. When this happens, within the five-year timeframe set out by the Insolvency Act, the property transfer can be set aside to help settle the debt, potentially leaving the lender with a costly shortfall under the mortgage.
Our ‘parental help to buy’ policy protects the lender’s security, and a non-parental policy option is also available, for cases where the deposit was gifted by other family members.
Responsive cover
This is just one instance where one of our Insolvency Act covers can help. Other options include where a property is sold at undervalue as a gift; where equity is transferred from sole to joint names following marriage, or the reverse in the case of a divorce; inter-company and company director transfers; and more. If the property is sold before the five-year period has expired, we can even cover the innocent third party purchasers and their lender, where they are unconnected to the parties involved in the transfer/gift.
Whatever the situation, we’re confident that we can provide a solution. To see the full range of policies and to get a quote online, take a look under the Insolvency Act heading on our products page. Or, if you would prefer to speak to an underwriter, call 01603 617617, or you can email enquiries@cli.co.uk.
[1] https://www.theguardian.com/business/2023/jul/25/one-four-new-uk-homebuyers-under-25-rely-bank-mum-dad-study
[2] https://www.savills.co.uk/blog/article/349204/residential-property/how-first-time-buyers-have-adapted-to-rising-house-prices.aspx