‘Bank of mum and dad’ isn’t just a free cash handout
More than half of family members that lend money to first time buyers expect to get it back, while three quarters want to be paid interest on top.
According to HSBC, loans from family members tend to come with their own terms and conditions, with only 31% of financial assistance being outright cash gifts and 17% asking for part ownership of the property in order to collect the money when the house is eventually sold on.
Peter Dockar, head of mortgages at HSBC, said: “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.
“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.
Women are less likely to be asked to pay interest than men, while those buying a property with a partner also more likely to be asked for interest on their loan.
How likely families are to charge interest to their FTB relatives also differs by region, with 94% families in the North West, 56% in Yorkshire, wanting interest on any loans handed out.
In the South East it is 56%, with the number going up to 77% in London.
The size of the property also factors in on the lending process, with loans for bigger properties more likely to be asked to pay interest than those buying smaller ones.