First-time buyers are increasingly relying on their parents to help them get on the property ladder, says a new report.

One in six (16%) have either borrowed or were given money by family to pay for the deposit. In addition, 10% are buying their property in conjunction with their family and nearly one in ten (8%) will rely on the family entirely to cover the associated costs such as stamp duty and furniture.

However, with many people concerned about the size of their pension pots, parents will find it harder & harder to give their children big cash sums, says high street mortgage broker, Bradford & Bingley.

"Now though, there are a number of ways that parents can help which won’t affect their retirement years," said Duncan Pownall, mortgage development manager.

Mortgage Options:

• Guarantor mortgages – parents can help their children onto the ladder by guaranteeing their mortgage payments. Bradford & Bingley’s research shows one in five already use mom or dad as a guarantor on their mortgage. On a general basis the parent’s income has to be sufficient to cover all their own debts and their child’s mortgage. Lenders also commonly require a 25% deposit. Examples of providers include Portman, Northern Rock, Nationwide and Leeds & Holbeck.
• Variations on guarantor mortgages – as the market has evolved some lenders have become more flexible, requiring a smaller deposit and only needing parents to be able to cover the amount above their child’s borrowing. Examples of such lenders include Royal Bank of Scotland and West Bromwich.
• Bank of Ireland’s First Start mortgage – This is a joint mortgage between parent and child or close relative and child. Available to 100% LTV. Choice of property ownership – joint or sole. Lending decision based on 4x parent’s income (taking existing commitments into account) + 1x child’s income.
• Offsets – A parent can put their money into a relevant savings account and offset it against their child’s mortgage. That way they can help reduce the interest payable on the mortgage but still retain access to their money if and when they need it. Obviously the parent’s savings wouldn’t earn interest, but nor would they be incurring tax.

"The mortgage market has increasingly responded to the plight of first time buyers and designed specialist, flexible mortgages to help them onto the property ladder," said Mr Pownall. "We currently estimate around 10% of first time buyer mortgages are guarantor-style mortgages and we would expect this to rise further as more and more twenty and thirty-somethings look to their parents for help to buy their first home. Indeed, we would expect to see more lenders offering these type of products and products themselves becoming more innovative and competitive."