There’s increasing help in the workplace for those planning retirement or struggling with debt. “Financial well-being” is this year’s “financial education” and the healthcare organisations have worked out that a solvent workforce is a workforce less likely to suffer from sickness.
But the financial base on which most of us build is our home. The big problem facing young people is that they do not have a home, only a room in someone else’s home or a flat which they can hardly call a home – so strict are the rental restrictions and weak their tenancy rights.
The numbers are startling. According to the social mobility commission, 63% of 20-29 year olds owned their own home in 1990. By 2015, that number had fallen to 31%.
Unusually, the housing problem is not being solved through work , but through the family unit. More than a third of homebuyers in England depend on money from their family.
Using the latest official data available, from 2013-14, Paul Sanderson and a team from Anglia Ruskin University found 34% of buyers needed cash or a loan from their parents.
That compared with just 20% in 2010/11. A further 10% of buyers relied on inherited wealth, the research found..
Legal and General confirm that a quarter of all mortgages in the UK last year were part-funded by parents. The average amount given was £17,500.
Helping your younger staff get the first foot on the ladder.
It is odd that relativley little is being done in the workplace to promote routes to ownership for the under 30s. The Government are aware of the issues and have put in place a number of initiatives
The Mortgage Guarantee scheme has now run it’s course but the help to buy scheme is going strong.
Help to buy
Help to Buy gives people who are able to get a mortgage the chance to buy a home with just a 5% deposit.
I’m grateful to the Legal and General Website for this explanation of how the help to buy equity loan works.
The Government lends you up to 20% of the cost of your new-build home. It runs until 2020 and is only available in England (though there are similar arrangements for other parts of the UK.
It only applies to new build homes from a registered Help to Buy builder. Your Help to Buy agent should have a list of registered builders for you to choose from.
For buyers in all London boroughs, the Government has increased the scheme’s upper loan limit from 20% to 40% to reflect the current property prices.
How it works:
- You can apply for the equity loan if you have a 5% deposit and you’re after a new build property.
- The equity loan can be worth up to 20% of the cost of your newly built home.
- As the equity loan can be worth up to 20% and you have a 5% deposit, the mortgage you need is therefore based on 75% of the cost of the property.
Benefits:
- Available to both first time buyers and those moving from another property they have sold.
- Helps you out of renting and onto the property ladder.
- The equity loan is fee free for the first five years.
- You can wait until you sell the property before you pay the loan back.
Need to know:
- In the sixth year, you’ll be charged a fee of 1.75% of the loan’s value. After this, the fee will increase every year.
- Loans are available on properties worth up to £600,000.
- You can’t go on to sublet the house.
- You can’t part exchange your previous property.
- You won’t be eligible to take the equity loan if you own any other property.
- After 25 years or when you sell your house whichever is earliest, you’ll have to repay the whole equity loan. The repayment amount is based on the percentage you borrowed (up to 20%) and not the original loan amount. For example, if you bought a £200,000 house and borrowed 20% through Help to Buy Equity Loan, then sold the house for £220,000, you’ll need to pay back £44,000, not £40,000.
- The property must be bought on a repayment basis, interest only isn’t available.
- Not all lenders offer Help to Buy mortgages, so your choice of mortgage may be limited.
- If you want a further advance or to alter or extend the property, you’ll need to obtain permission from the Post Sales Help To Buy Agent.
How to apply:
You need to speak to a Help to Buy agent, who are supplied by the government. They’ll talk you through the scheme to find out whether it’s right for you. You can find them on http://www.helptobuy.org.uk/equity-loan/find-helptobuy-agent.
Building new homes
For help to buy to work, we need affordable new homes being built in parts of the country in which people are able to find the jobs to meet housing costs. Work is the vital link in all this.
Sharing home ownership
If we are serious about ideas like inter-generational fairness, we need to treat the housing issue as more than a job for the “bank of Mum and Dad”. I have written on this blog about the good work of unmortgage. They are only one of many organisations aiming to increase shared ownership of property between those who have the money (the big financial institutions looking for a steady income stream) and those who don’t!
The demand for shared ownership is clear. Go to https://www.sharetobuy.com/ to see the diversity of arrangements which are coming to market.
What are you doing?
We (First Actuarial) are interested in extending the work we do around retirement, to those who are building the platform for their later-life saving (through home-ownership or assured tenancy).
If you work for an organisation that is actively helping younger staff get on the housing ladder, we’d be interested in details. You’ll appreciate that as pension consultants this is not home ground!
We’d be particularly keen to hear from social housing organisations about what they are doing both for their staff and for others.
If you’d like to help us out in this, please contact henry.h.tapper@firstactuarial.co.uk or Natalie.ogden@firstactuarial.co.uk .