professional advice – The NEN – North Edinburgh News

L&G: Bank of Family lends £20.7k on average to homebuyers in Scotland

Bank of Family support varies regionally and isn’t closely aligned to house price differences – recipients in the East of England are receiving most support (av. £32,100), while those in the West Midlands receive the least (av. £19,800)
Affordability issues are universal but most Bank of Family support goes to urban home purchases (216,500), compared to 100,500 rural homes
According to the survey, just 39% of Bank of Family recipients will benefit from professional advice from a mortgage broker or financial adviser before accepting help this year

Housing affordability is worsening across all UK regions, forcing many aspiring homeowners to depend on financial gifting from relatives – the Bank of Family – to step onto the ladder, according to new data from Legal & General and the Centre for Economics and Business Research (Cebr).

The report reveals that Bank of Family recipients may receive varying amounts of support depending on where they live. Surprisingly, levels of gifting don’t closely align to house price differences – according to the data, borrowers in the East of England are receiving the most support (av. £32,100), while those in the West Midlands receive the least (av. £19,800).

Huge gulf between the UK’s urban and rural markets

The data also indicates that the volume and individual size of Bank of Family gifting varies depending on whether the borrower lives in an urban or rural area. In 2023, the Bank of Family is expected to support the financing of 216,500 urban home purchases. Meanwhile, the number of rural homes bought with support from the Bank of Family will be less than half that total, at 100,500.

Homebuyers in towns and cities are not only more likely to lean on the Bank of Family to buy a home, but they often need to borrow more than those in rural areas. The Bank of Family is estimated to gift £5.7 billion towards urban home purchases in 2023, accounting for 70% of the value of Bank of Family support and more than two-thirds (67%) of the transactions it facilitates.

That equates to roughly £82bn worth of housing in 2023. The average gift or loan size for an urban home is also higher at £26,200, compared to £23,900 for a rural property.

Bank of Family propping up purchases up and down the country, but with huge regional variations

Although house prices appear to be softening, homebuyers are still facing worsening affordability across the UK property market. The Bank of England base rate increased from 0.1% in December 2021 to 5.25% in August 2023, significantly increasing mortgage costs, with the average repayment for a semi-detached house rising by 61% across all UK regions from 2022 to 2023.

These wider affordability currents are reflected in Legal & General’s report, which investigates the amount of property transactions in each UK region that received funding by a loan or gift from the Bank of Family. Buyers in London are by far and away the most likely to receive financial aid from family members, perhaps unsurprising with the average house price standing at almost double the UK average (£534,000 compared to £286,005 in April 2023).

In fact, the survey suggests the Bank of Family supported two-thirds (67%) of recent homebuyers in the capital, more than double the proportion of the second-placed region (the North West at 36%).

Legal & General also recorded the average size of Bank of Family financial gifts across all UK regions.

London, the South East, the East of England and the South West see the greatest contributions from the Bank of Family. However, there is not always a direct correlation between regional house prices and the average size of a Bank of Family gift. The East of England leads the way across all UK regions for the highest average Bank of Family gift or loan at £32,100 despite its lower house prices, trumping even London gifting at £30,000.

Find out more about the regional variation in Bank of Family lending with Legal & General’s interactive map, here.

Kevin Roberts, Managing Director, Legal & General Mortgage Services, commented: “Up and down the country, the Bank of Family is making significant financial sacrifices to help family members onto the housing ladder.

“Support is concentrated in urban and southern areas, where house prices are the highest, but is prevalent across the UK. While a brilliant lifeline for those able to draw on it, many people will not have access to such generosity and this widespread support is indicative of deep, underlying affordability issues affecting the UK.”

Significant gender split in borrowers seeking professional financial advice

Despite the Bank of Family being set to support a record number of home purchases in 2023, Legal & General’s survey also found that many recipients are not seeking professional advice.

Aspiring buyers who draw upon family support largely do not speak to an adviser before accepting family help, with just 39% of borrowers seeking guidance from a mortgage broker or professional adviser during their Bank of Family transaction. More than a quarter (28%) did not seek any advice at all.

Gender also plays a crucial role in borrowers’ decisions to seek professional advice. At 46%, women are far more likely to speak to a professional adviser than men (30%). In comparison, men (42%) were much more likely to depend on advice from friends than women (29%). Overall, 35% of all respondents asked friends and acquaintances who had similar experiences for advice.

Kevin Roberts, Managing Director, Legal & General Mortgage Services commented: “The Bank of Family has not only become a major lender – the ninth largest in the UK if it were a formal entity – but also a significant source of financial advice, with less than 40% of financial aid recipients seeking professional guidance before their transactions.

“The gender dynamics at play are also fascinating. At 46%, women are far more likely to speak to a professional adviser than men at 30%. In comparison, men are much more likely to depend on advice from friends than women, at 42% compared to just over a quarter (29%).

“In such a challenging economic climate, buyers must not overlook the insights that an adviser can bring to even the most complex of property transactions. Failing to do so could prove a very expensive mistake later down the line.”

Read the full report on the Legal & General website here. Find out more about how families can support each other when it comes to homeownership in the Legal & General Guide to Gifting here.

Advice on installing garden lights

What do I need to know in terms of electrics when fitting new lights in the garden?

Paul Collins, Head of Technical Services at NICEIC, answers:

“When fitting new lights in the garden, it is vital that all work completed is done in accordance with the latest Electrical Regulations (BS 7671) to guarantee maximum safety. As the lights are being fitted outside, there is the added risk of adverse weather – this increases the risk of injury from an electric shock when handling outdoor electrical equipment.

“Outdoor lighting is at the top of the list for garden installations, with 51% saying they planned to install lighting to their garden last year. Speak to your local NICEIC certified electrical contractor before any outdoor light fixtures are fitted as they can advise the safe and appropriate steps that need to be taken to ensure the work is carried out to the highest standard.

“Should you employ their services, they will also be able to take care of the appropriate notification to the local building control body (if required) and issue certification once the work is completed.

“You can also speak to your local NICEIC certified contractor about carrying out an electrical inspection, especially if you have any concerns regarding the electrics in your garden.

“Following this inspection, you will receive an Electrical Installation Condition Report (EICR) that will highlight damage, defects or dangerous conditions in your garden.

“You can search for an NICEIC certified contractor in your area by simply visiting niceic.com and typing in your postcode – but do make sure you get quotes from at least three different NICEIC certified contractors before agreeing to carry out any work.”

Short-term lets: professional advice is ‘the only real safeguard for owners’

As Edinburgh tightens the net on Airbnb-style short-term lets, what are the options for property owners and landlords?

By Calum Allmond

It was always on the cards that if restrictions were to be introduced on short-term letting in Scotland, Edinburgh would be first out of the blocks. And, sure enough, the council last month introduced a city-wide “control zone”.

The capital, which for obvious reasons is the country’s tourist Mecca, has become a magnet for Airbnb-style short-term lets over the last decade, leading to concerns about housing shortages and perceptions about anti-social behaviour.

Under draft proposals which will now go to Scottish Government Ministers for final approval, property owners will soon need planning permission to be able to operate short-term lettings and will have to apply for a change of use certificate from the planning department.

What is less well known is that the council has always had the power to require planning permission in the event of a material change in environment, such as short-term rentals. The difference is that, from now on, this will be mandatory.

It should be noted that the proposals only apply to secondary lettings, i.e., properties which are not an owner’s primary residence. People will still be able to let out their homes while on holiday, or rooms in their home while they remain in residence.

However, while the new restrictions appear to be forging ahead, it still remains unclear what policies the local authority will eventually apply. The current Development Plan – the overarching guide to future council thinking – makes no mention whatsoever of short-term lets.

Nor, surprisingly, does the document designed to replace it, the City Plan 2030, which again does not concern itself with the issue – making it increasingly difficult for property owners to plan ahead.

One can only speculate at the moment about whether permissions will be granted for continued short-term use, and on what grounds. Nor is there any clarity about whether numerical limits will be imposed.

Were there to be limits, it would be reasonable to assume that applications would be allocated on a first-come, first-served basis, so landlords hoping to remain in the market might be advised to act sooner, rather than later.

There is, of course, an existing provision in law whereby if a short-term let has been operating for more than 10 years, with no action against it by the council and no action to conceal its operation, then it is entitled to a Certificate of Lawfulness to continue operation, though necessary evidence will be required.

As of the start of this month, there have been nine applications so far this year for planning permissions for short-term lets, only two of which have been granted – and they both involved Certificates of Lawfulness.

What to do if applications fail is clearly now a matter of immediate concern for property owners and DM Hall’s specialist rural arm Baird Lumsden is currently embarked on an information campaign around the sales, letting and management options which remain open.

It has gone into the issue in depth, in anticipation that Highland Council will be the next authority to impose short-term let restrictions around the Badenoch and Strathspey area, and is reaching out to concerned parties.

Informed and impartial advice of this nature is something of a port in a storm for property owners who are caught between a rock and a hard place as the restriction net tightens.

There has been anecdotal evidence of landlords exiting the short-term market and moving to longer lets in the private rental sector. But regulation in this sphere of activity is getting stricter all the time, and the imminent New Deal for Tenants will do nothing to ease landlord pain.

On a superficial level, it is easy to understand the council’s hope that properties taken out of short-term lets will find their way back into the housing stock, thus easing ongoing shortages.

But a counter-argument, articulated by bodies such as the Association of Scotland’s Self-Caterers, is that lack of house-building is as much of a contributory factor to shortages, and that short-term lets bring in huge volumes of valuable tourism revenue to the city.

As things are, some smaller operators may indeed be forced to sell up and quit the market, although larger letting concerns will almost certainly continue to jump through the necessary hoops.

In this volatile environment, expert professional advice is the only real safeguard, and prudent property owners and landlords will seek it out as timeously as possible.