09 Apr 2019

5 ways to help young employees with housing costs

The average UK home costs more than £200,000. First-time buyers need a deposit of between 5 to 25 per cent of the purchase price to secure a mortgage, so for a 10 per cent deposit on the average home cost that’s £20,000 to be saved. Average student debt can be around £50,000. Is it any surprise, therefore, that for younger employees the figures may not seem to stack up and that owning their own home can seem a far-off dream?

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Such challenges can be disheartening for staff who should be focused on their exciting new careers, rather than worrying about how they will be able to afford their own property one day. Thankfully, as an employer there are a number of ways you can help younger staff better manage their housing costs, so that the idea of owning their own home becomes more than just a dream. Below we outline five ways to help:

Encourage employees to establish a plan to reach their housing goal
The value of goal-setting is obvious. It’s what drives employee development at work, helping staff to learn, achieve and progress in their career. A new intern may have seemingly wild ambitions to one day be CEO but with hard work and dedication they can get there. Similarly, first-time buyers need to understand that their house-buying dreams aren’t as out of reach as they might think.

Mortgage advice and financial education when staff are in their early careers and may not yet be in a position to buy can seem a waste of time. However, it can be invaluable in helping staff prepare a plan to reach their goal. They can better understand what sort of mortgage products they may be able to access, the costs associated with house-buying (from stamp duty to conveyancing, as well as the price of the deposit) and the steps needed to reach their home-owning goal.
Teach staff how to tidy up their finances to be lender friendly
Once an employee has a plan in place they need to take steps to make themselves mortgage ready. In simple terms this is about tidying up their finances. A good credit history is important, this involves being on the electoral register at their current address, having some form of credit (and managing it responsibly) and putting a tighter rein on general spending.

Since mortgage companies assess on affordability (rather than simply just income) excessive spending – whether on unused subscriptions, daily take-aways or a wild gambling habit -- simply won’t help an employee’s argument that they can afford a mortgage. Instead, they need to focus on getting their financial life in order with bank statements that support that, enabling them to become more appealing to a lender.
Encourage them to save (and manage existing debt)
Alongside establishing their mortgage plan and tidying up their finances, staff also need to be managing existing debt responsibly whilst saving for their future deposit too.

Staff can be encouraged to establish healthy spending habits through a number of ways – from financial education to workplace savings schemes that promote good saving habits.
Help them understand help-to-buy schemes
The UK Government offers a number of ways to help staff achieve their housing dreams. This includes the Help to Buy: Equity Loan scheme in which the Government lends up to 20 per cent of the cost of a newly-built home. Alternatively, there is the Help to Buy: Shared Ownership scheme, allowing employees to buy as little as 25 per cent to 75 per cent of their home and pay rent on the rest. For those still saving, investing in a Help to Buy: ISA scheme will see the Government boost savings by 25 per cent, although they are only available to new savers until 30 November 2019.

The Government’s Help to Buy scheme has enabled more than 150,000 first-time buyers get on the property ladder. In last November’s Budget it announced a new Help to Buy scheme from April 2021 which it has confirmed will run to March 2023, meaning your younger employees have another four years to access the benefit – and plenty of time to plan, with your help.
Teach them about the bank of mum and dad
Finally, an increasingly popular option for younger employees looking to get on the housing ladder is accessing the bank of mum and dad. As an employer, you have the chance to provide advice both to the younger workers who need access to such funds, as well as those of your employees who are parents, who may want to understand the options available to them to provide such a helping hand.

Whilst lenders are increasingly providing products for this market with guarantor or parental support mortgages, the emotions and challenges involved in this route means that the right advice is even more critical here.