With just a few days left to go, there’s little we can do but hope that our Chancellor favours the opportunity to ease homebuyers’ struggles rather than look for new ways to tax the property market.
Incentivising the distribution of intergenerational wealth and helping aspirational homeowners to save more sit at the top of my Budget wish list, should Rachel Reeves happen to be reading.
Why? Because deposit pressures are still very real.
According to Rightmove, tenants use 44% of their wages to cover rents. This compares to 34% of household income needed to cover mortgage repayments, said Nationwide in its latest economic update.
One of the easiest ways, in my view, to improve the flow of cash between families who have the means to share wealth is by making small, impactful adjustments to gifting allowances.
The current gifting rules allow everyone to make an annual gift of £3,000 which is exempt from Inheritance Tax. If unused, it can be carried forward for one tax year. On top of this, we’re all entitled to make a tax-free wedding gift of up to £5,000 to a child, £2,500 for a grandchild or great-grandchild, and £1,000 for others.
Had the annual tax-free gifting allowance kept pace with inflation it would now be £12,000. If this is considered too big a leap by which to bump up this benefit, then why not go to £9,000 instead, as others have suggested? If two parents combined their gifts and rolled them over for one year, that’s a tax-free deposit contribution of £36,000.
Or, create a new category – ‘contribution to a housing deposit’. It could be a one-off tax-free gift of, say, £50,000 per child or grandchild, which has the combined benefit of helping them into homeownership while reducing the IHT liability of the parents’ estate.
It would certainly be the easiest type of gift to audit, with a simple paper trail.
But it’s not a universal solution to the deposit problem. Passing on intergenerational wealth is great, but what about everybody else who can’t rely on parents?
A savings account with better returns and fewer restrictions and penalties than a Lifetime ISA would help renters build their deposit. And a scheme akin to the Tories’ idea of a National Insurance rebate for first-time buyers is also a good idea.
But in the absence of any deposit-building schemes, it’s down to mortgage lenders to bridge the generational wealth gap.
At a recent conference, Barclays said its focus would be on products for customers who didn’t have access to intergenerational wealth, so we know that it’s a priority for some lenders. But the bank has remained tight-lipped on the details at present.
We’ve also seen Newcastle Building Society open up its 98% loan-to-value (LTV) mortgage, ‘First Step’, to the whole market after a limited distribution launch.
If you’re a tenant and you’ve got high rent to pay and there’s no family to help you, then saving a 2% deposit feels more manageable than trying to save 5%.
And those buying a new build may be able to rely on a developer’s contribution to the deposit, either through a key worker scheme or just by way of a package of incentives.
But is this enough? I think there’s room for even more innovation.
The Financial Conduct Authority is considering how rental payment histories can play a greater part in affordability calculations. Skipton largely stands alone in this market at the moment, with its Track Record deal.
So perhaps this type of lending should be a priority for lenders in 2026 and an option that’s more readily available to borrowers with no Bank of Mum and Dad assistance.
But all this leads to a much higher borrowing burden resting on homeowners’ shoulders at such a young age, with the only option being to stretch the term of their mortgage up to 40 years.
So yes, lenders can try to make it easier for the ‘have-nots’ to get on the property ladder, but government has the power to ease the levels of debt needed to get them there.
Have a heart, Ms Reeves, and help our homeowners out.
Helen Pierson is director at MAB New Homes
