Coronavirus – and the markets’ volatility

It’s a tough environment for first time buyers. Rising house prices and stagnant wage growth have pushed up the average age of buying a first property to 33. What’s more, first time buyers need to borrow 18 times more than those in the 1970s.

Given this context, it’s unsurprising that more and more parents and grandparents are giving their loved ones a helping hand to get on the property ladder. However, because there are several ways of doing this – all with their distinct advantages and disadvantages – it can be hard to find the right way to help out. Here is a breakdown of a few common ways of giving the next generation some extra support:

Gifting a deposit

Gifting a deposit might seem like the most straightforward way of helping your child, but there could be unexpected tax implications. For instance, cash gifts of over £3,000 in one year may be subject to inheritance tax, if you die within seven years of making the gift. 

If you do think gifting a deposit could be a good option, you might want to act sooner rather than later. A cross-party group of MPs is currently proposing an overhaul of the IHT system where all gifts over £30,000 will be subject to a flat 10% tax rate.

Guarantor mortgages

A common alternative to directly gifting cash is to use a guarantor mortgage. These mortgages are sometimes referred to as 100% mortgages because they don’t require the borrower to put down a deposit. Rather, a parent will lock up cash in a savings account with a lender or agree to use their property as collateral if the buyer defaults on repayments.

If you use savings as security, you’d normally need to place either 5% or 10% of the cost of a new property into a savings account with the lender for several years (three or five years are the standard). The interest returned varies from lender to lender, with some not paying any at all.

Joint mortgages

These mortgages allow you to buy a property together with your child. Notably, this option increases your child’s chance of getting a mortgage in the first place as your income will be taken into account. 

However, it can be expensive and risky. As your name will be on the deeds of your child’s home, you’ll need to pay the stamp duty surcharge if you already own a property. What’s more, you’ll be jointly responsible for repayments. 

A new polymer ‘‘Turner’’ £20 note entered circulation at the end of February which the Bank of England claims is its most secure banknote ever. The new note replaces the ‘’Adam Smith’’ £20 note that has been in circulation since 2007.

Artist JMW Turner is the new face of the £20 note. He is considered one of the finest British artists of all time and painted The Fighting Temeraire which was voted the nation’s favourite painting in a BBC Radio 4 poll.

Security on the new note is tight – £20 notes are the most commonly forged banknote, accounting for 88% of detected forgeries in the first half of last year.

Enhanced security features include a large see-through window with a depiction of the Margate Lighthouse and the Turner Contemporary, Turner’s self-portrait and a metallic hologram which changes between the words “pounds” and “twenty” depending on how the note is tilted. The notes also have a purple foil patch containing the letter “T”, a nod to the Tate Britain where many of Turner’s paintings are displayed.

Sarah John, the Bank of England’s chief cashier, said: “Moving the £20 note to polymer marks a major step forward in our fight against counterfeiting.” There are currently two billion £20 notes in circulation so replacing them all is no mean feat. The Bank estimated, however, that half of all ATMs across the UK would be distributing the new notes within just two weeks of the launch.  Old notes, however, will remain valid legal tender for six months.

The new banknote was produced in association with the Royal National Institute of Blind People, to make money more accessible for people with sight loss. There are three separate clusters of dots along the short side of the note to make handling cash easier. 

The new plastic £20 notes are longer lasting than the paper notes they are replacing. However, there are doubts about exactly how long these “long-lasting” notes will be used for as we move towards a cashless society. Contactless cards and quick online payments have revolutionised how we spend over the last decade.

The Financial Inclusion Commission estimates that cash payments will account for fewer than one in 10 payments by 2028. Campaigners warn that the UK is moving rapidly towards becoming a cashless society with little research into how this will affect the country.

In the last year alone, 13% of free-to-use UK cashpoints have closed and a quarter of all machines now charge people to withdraw their cash. Campaign groups are calling for legislation that will force banks to provide cash access to curb this trend.