Half of potential homebuyers would welcome a return to 100% mortgages

London’s high cost of living can make it difficult to save enough for a mortgage deposit.

As a result, the proportion of first time buyers who use money gifted from their parents to help purchase a home is rising.

However, not every potential home buyer is in the position where their parents are able to help them financially, and this has led to some calls for the return of 100% loan-to-value mortgages, which more or less disappeared following the Mortgage Market Review.

Stephen Ludlow, Chairman of ludlowthompson, says: "The reality of today’s market is that the vast majority of homebuyers will need a significant deposit, for first time buyers it is a pre-requisite.

“The Government’s First Time Buyer ISA offers relatively generous terms for those saving for a deposit, and there are a range of products now available.

“However, some critics are sceptical about ‘the bank of Mum and Dad’ providing deposits for their children's property purchases. Since the Chancellor recently announced changes to Stamp Duty,  it has been suggested that there is the risk of  parents providing deposits for their children’s homes as a means of investing in second homes, without paying the additional 3% stamp duty.

"Parents are increasingly looking to invest in a second property for their children who may be a student or just starting their first job in London. This not only helps their children and offers a great investment opportunity, but it is also increasingly becoming part of a wider lifestlye choice. Second homes can also provide parents with a convenient place to stay for weekend shopping trips,especially at Christmas!"

“Funding for lending offers an opportunity for some banks looking to hook high earners, such as lawyers, as they offer loans of extended multiples of income to reflect future potential earnings that are otherwise unavailable elsewhere."