Bank of Family is now funding more than 10% of buyer deposits

Parents and other family members are increasingly funding deposits as house prices soar and younger generations struggle to save the money they need.

According to a March 2025 article published by MoneyAge, 10% of buyer deposits are now funded by loved ones following an increase of 46% over the past five years.

If you’re lucky enough to benefit from family support that means you can purchase your first home, there are some key questions to ask.

Alternatively, if you don’t have family support, you can also read on to discover three options that could help you buy your home.

Receiving a lump sum to purchase a home can be overwhelming, asking these two important questions could make sure you’re all on the same page.

Don’t assume that the money is a gift if they haven’t explicitly said it is. Miscommunication could cause financial issues for both you and your family member in the future. So, being clear about what you’re being offered is essential.

If the money is a loan, it may be a good idea to seek legal advice. That might seem strange when it’s your loved ones offering support, but a solicitor could help formalise areas like a payment plan, whether interest will be added, and what would happen if you can’t repay it, to ensure you’re all on the same page.

Even if the money is a gift, be sure to ask if there are any strings attached. As they’ll be partly funding the purchase, your family member might have expectations about the type of property you choose or your living arrangements, so setting boundaries from the outset may be useful.

The mortgage and living arrangement can become more complex if you’re buying with a partner – what would happen to the gifted money if the relationship broke down? A legal agreement like a deed of trust could protect the gift.

1. Use a Lifetime ISA to save

If you’re saving for your first home and are aged between 18 and 39, opening a Lifetime ISA (LISA) could be worthwhile.

Each tax year, you can deposit up to £4,000 in a LISA and benefit from a 25% government boost. So, if your goal is to save £20,000 for a deposit, you’d need to save the maximum amount for four years to reach the milestone thanks to the bonus. 

There are some restrictions it’s important to be aware of before you choose a LISA for your savings.

First, if you withdraw the money for a reason other than buying your first home before the age of 60, you’ll pay a 25% penalty on the overall value of your LISA. This means you’d lose the bonus and a portion of your own deposits.

Second, to benefit from a LISA, you’ll need to buy a property that costs £450,000 or less with a residential mortgage – you cannot be a cash buyer or use a buy-to-let mortgage.

2. Consider purchasing a shared ownership property

Shared ownership allows you to buy a portion of a property and rent the remaining share.

As a first-time buyer, this means your deposit could be significantly lower, allowing you to get on the property ladder sooner. In addition, if you think you’d struggle to secure a large mortgage, this option could reduce the amount you need to borrow.

Usually, you can “staircase”. This is where you’d gradually buy more of the property until you own all of it.

A key downside here is that there are relatively few shared ownership properties available, so it may be difficult to find a home that suits your needs. 

3. Search for a low-deposit mortgage option

One of the first hurdles for first-time buyers is saving a deposit. Traditionally, first-time buyers have put down a deposit of at least 10%.

According to the Halifax House Price Index, the value of the average home was more than £296,000 in March 2025. So, you’d need a deposit of around £30,000 if your mortgage required 10%.

The good news is that there are lenders that have low-deposit mortgages available. For instance, some will accept a deposit of 5% and there are even some that don’t require a deposit at all. A mortgage broker could help you assess if you could be eligible for one of these mortgages and bring your dreams of homeownership one step closer.

If you’re searching for a mortgage to buy your first home, please get in touch. We’re here to explain the different mortgage options and could even help you find a lender that’s most likely to approve your application or offer you a lower interest rate.

Please get in touch to arrange a meeting.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

A Stocks and Shares ISA is a medium- to long-term investment, which aims to increase the value of the money you invest for growth or income or both. The value of your investments and any income from them can fall as well as rise. You may not get back the amount you invested.

Approved by The Openwork Partnership on 14/05/2025.