How can benefits help first-time buyers as property prices surge?

benefits
  • Employers can work with providers to offer financial education in the form of specific content guides, downloads, webinars, helplines, tools and modellers, including budgeting, mortgage affordability, mortgage rate calculators, and stamp duty calculators.
  • One option employers can offer to help first time buyers is the lifetime individual savings accounts (Lisa), through which they can get a 25% government bonus on amounts they pay in.
  • Employers can support first-time buyers by helping them to understand how mortgages work, or by linking up with mortgage brokers to provide educational seminars.

As a result of high inflation and the continuing cost-of-living crisis, workplace savings solutions and financial education are growing in popularity as employers continue to look for ways to support their employees. Providing benefits, tools and knowledge to first-time buyers who may be intimidated or not as knowledgeable on the topic could help them get onto the property ladder in this turbulent economy.

Financial education

Workplace financial education is something that an employer can offer initially to help first-time buyers. Employers can work with providers to offer financial education in the form of specific content guides, downloads, webinars, helplines, tools and modellers, including budgeting, mortgage affordability, mortgage rate calculators, and stamp duty calculators.

There are a range of options for employers to include in such a programme, says Jeanette Makings, head of financial education services at Close Brothers. “Access to one-to-one guidance, and advice about budgeting and understanding the costs of running a home for example, as well as the best products for saving towards a first house deposit and a mortgage, renting for the first time, and preparing to get a first mortgage,” she says. “A good financial education programme can also address how parents and grandparents can consider helping young family members to get on the property ladder.”

If some staff feel embarrassed asking what they may feel are obvious questions, their employers could arrange for someone they can talk to, to ease their worries.

Joshua Gerstler, chartered financial planner and owner at The Orchard Practice, says: “Employers could offer discounted or free access to financial planning to their employees. They could also ensure these meetings take place during working hours, so that they do not need to take time off to meet with someone.”

In terms of what employers can do when it comes to home ownership, access to education before the purchase is key. Financial wellbeing apps, as well as virtual or in-person training or counselling, can help with financial planning and housing market education.

Lists of resources are useful, and employers can also provide access to trusted estate agents, according to Carolina Valencia, research director for total rewards and performance management at Gartner.

“During the purchase process, organisations can help by supporting the down payment, the cost of buyers’ home inspection or insurance costs,” she explains. “Once the purchase is complete, organisations can continue to educate employees around managing mortgage payments and continuing to make financial wellbeing apps available.”

Employees will need to understand the advantages and disadvantages of each savings method to fully take advantage of them, and choose the most appropriate one for their needs. In order to do this, they would benefit from support on how they could better manage their finances in order to free up more money to put towards their savings.

Jonathan Watts-Lay, director at Wealth at Work, says: “Helping employees to manage their finances and providing them with a good understanding of the benefits and support available to them can make a big difference. One way to achieve this is through financial education and guidance sessions. Many organisations now offer this support as part of their wellbeing initiatives.”

Workplace benefits

Employers may want to consider offering a mortgage advice service as an employee benefit. There are a number of specialists that offer this directly or via the workplace as a flexible benefit, and some services include helpful add-ons such as a moving-in service.

A valuable workplace benefit that employers can offer to help first-time buyers is the lifetime Individual savings accounts (Lisa), where they can get a 25% government bonus on amounts they pay in, says Sarah Steel, director at Better with Money. Offering it through the workplace means that employees can save directly through their pay, making it easier to start saving and to stick to it.

“The launch of this product within a workplace needs to go hand-in-hand with financial education so that employees fully understand the [lifetime Isa] and the rules associated with it, as well as how saving into an Isa can fit into an overall financial plan,” she says. “Savings are held in a normal savings account, which could mean that they are earning an interest rate that is not even keeping up with inflation. For those saving for a house deposit, that means they are losing out on a 25% annual bonus on contributions they make, potentially up to £4,000 a year.”

Another way of helping staff to get onto the property ladder is pension redirect, where they are given the choice to redirect some of their and their employer’s pension contributions into a workplace Isa or a lifetime Isa.

“This is a fantastic approach as it means that younger employees are getting financial support to save for their first home while they’re still saving for retirement,” explains Steel. “Employers may also want to look into offering webinars for first-time home buyers that not only raise awareness of the [lifetime Isa], but also educate staff on the whole process of buying a home, improving credit scores and finding the right mortgage.”

With the cost-of-living crisis putting pressure on household finances, it is now even more difficult than ever for first-time buyers to get on the property ladder, so any support that employers can offer their workforce can be helpful.

Share plans, such as sharesave schemes, through which staff can save up to £500 a month, and a share incentive plan, under which shares are held by a trustee on behalf of an employee, can help workers save for a deposit, says Watts-Lay.

“There are also a couple of variations of the Help-to-Buy scheme such as the mortgage guarantee scheme announced last year, which enables lenders to purchase a guarantee on mortgages where a borrower has a 5% deposit,” he says.

Different approaches

An alternative approach that employers could take is offering a scheme to assist first-time buyers with a home deposit, perhaps replacing a bonus scheme or built into their contract of employment or remuneration.

Rob Peters, principal at Simple Fast Mortgage, says: “[This can be] an attractive incentive to bring in more younger talent given property ownership is high on their agenda, and could help with staff retention as those employees could only be eligible for the deposit assistance if they stayed at the business a certain number of years.”

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Employers can also support first-time buyers by helping them to understand how mortgages work, or by linking up with mortgage brokers to provide educational seminars. Local arrangements between employers and brokers that give reduced mortgage advice fees to employees or mortgage clinics at the employer’s premises to help answer questions and educate potential future borrowers may also be beneficial.

As Scott Taylor-Barr, financial adviser at Carl Summers Financial Services, concludes: “Both are simple and cheap for the employer to set up and offer great value to the employee, as well as helping the broker generate new business and clients.”