Parents of first-time buyers have a unique opportunity to assist their children in getting onto the property ladder through a £2,000 cash “gift” from property developer Persimmon Homes and its subsidiary Charles Church. This initiative, known as the Bank of Mum and Dad scheme, rewards parents or other family members with a £2,000 incentive if they contribute at least 5% of the sale price towards their child’s purchase.
On average, Persimmon properties sell for £277,000, requiring parents to contribute approximately £14,000 to receive the cash incentive. For Charles Church properties, which have an average price of £418,000, the required contribution is around £21,000. The parents must provide a letter stating that the gift is non-repayable and interest-free.
This scheme, though relatively unknown, is part of a series of initiatives launched by property developers and the government to encourage first-time buyers. One notable scheme is the Help to Buy initiative, which provides a 20% equity loan (40% in London) from the government to first-time buyers who contribute 5% of the property price. Although this scheme is no longer available in most parts of the UK, it remains open in Wales.
According to buying agent Henry Pryor, the Persimmon scheme is unique in its focus on incentivizing parents to assist their children. However, Pryor suggests that most people would prefer a £2,000 discount off the property price rather than their parents providing the cash directly.
It’s important to note that the £2,000 cash gift does not affect the recorded selling price of the property. This ensures that the value of similar properties and the eventual sale price of the property in question are not negatively impacted.
The Bank of Mum and Dad scheme is available across all Persimmon Homes and Charles Church sites. While parents often help their children with deposits, mortgage broker David Hollingworth suggests that this additional incentive may increase parents’ confidence in providing the necessary funds.
To participate in the scheme, potential buyers should consult with a financial adviser to determine if it suits their circumstances. Developers like Persimmon Homes are exploring innovative ways to attract buyers amidst soaring interest rates that make homeownership challenging for many first-time buyers.
Although property prices have fallen by an average of 2.4% compared to last year, higher mortgage costs have made homeownership less affordable. In July, the average interest rate on a two-year, fixed-rate mortgage reached a 15-year high at 6.74%.
Edward McCoy, representative of Persimmon Homes, hopes that their scheme, introduced quietly in November last year, will make purchasing a first home more attainable. He emphasizes that the company offers various schemes to assist first-time buyers.
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