Bank of Mom and Dad is now getting £2,000 from the builder for his first home

Parents of first-time buyers are being offered a surprising incentive to help their children up the property ladder: a ‘gift’ of £2,000 in cash from the property developer.

The so-called Bank of Mum and Dad scheme, run by homebuilder Persimmon Homes and its subsidiary Charles Church, promises parents or other family members a reward of £2,000 (in most cases) if they contribute at least five per cent of the sale price. for the purchase of their child.

Persimmon properties sell for £277,000 on average, meaning parents would typically have to fork out around £14,000 to get their gift. Parents helping a child buy a Persimmon property on the Fiddington Fields site near Tewkesbury, Gloucestershire would have to pay £17,250 to get the monetary incentive.

Charles Church properties cost an average of £418,000, representing a contribution of approximately £21,000. For developments such as the Harlands Park site in Uckfield, East Sussex, a five per cent contribution would be £27,750.

Parents must provide a letter stating that the gift to their child is non-refundable and no interest will be charged.

The little-known plan is one of an initiative launched in recent years by property developers and the government to encourage first-time buyers to make a purchase.

Notable among these is the government’s Help to Buy scheme for new build homes, which closed to new applicants in October last year and offered first-time buyers a 20 per cent equity loan (40 per cent in London) from the UK government. If the government itself could raise five percent. In Wales, the scheme is still open.

However, buyer’s agent Henry Pryor says the Persimmon scheme is the first he’s seen prompting first-time parents to help.

“Homebuilders are understandably eager to find a replacement for Help to Buy,” he says, adding, “Parents already have a great emotional incentive to help their kids, and the Bank of Mum and Dad is the ninth largest mortgage lender.

“Most people would like to receive a £2,000 rebate on the property, rather than their parents collecting the £2,000 themselves.”

The £2,000 is a cash gift and will not be deducted from the house price. This means that the donation does not affect the recorded sale price of the property, which could affect the value of similar properties, as well as the value of the property in question when it is eventually sold.

The program is available at all Persimmon Homes and Charles Church locations.

David Hollingworth, of mortgage broker L&C, says parents often help with deposits anyway, without the need for an extra incentive, as putting together a fixed amount is usually the biggest hurdle first-time buyers have to overcome on their way to owning a home.

According to real estate firm Savills, 46 percent of first-time buyers with a mortgage received family assistance when buying their home last year. This figure is expected to rise to 61 percent by 2023, after the end of the Help to Buy scheme.

Hollingworth says of the Persimmon program, “It could give more parents the confidence to put money aside for a down payment.”

Those considering the arrangement will sit down with a financial advisor before committing to it. The consultant will look at the circumstances on a case-by-case basis and tell applicants if they don’t think it’s right for them, Persimmon said.

Developers must think outside the box to attract buyers, as rising interest rates push home ownership beyond the reach of a growing number of first-time buyers.

Falling prices mean that the average real estate is 2.4 percent cheaper than a year ago, the Halifax said. But home ownership is less affordable than twelve months ago due to higher mortgage payments.

The average interest rate on a two-year fixed-rate mortgage hit a 15-year high in July and is now at 6.74 percent, according to interest rate monitor Moneyfactscompare.

Persimmon Homes’ Edward McCoy wants his company’s plan — which launched to little fanfare last November — to make buying a first home more feasible.

He says: ‘While we recognize that the climate is a challenge, market starters should know that we have a range of schemes available to help them.’