First-time buyers will receive almost £30bn in financial support from their parents over the next three years as the housing ladder slips increasingly out of reach for independent young buyers.
Gifts and loans from the Bank of Mum and Dad totalled £9.4bn in 2023, according to the latest analysis from property firm Savills.
This figure has nearly doubled in the last five years due to sky-high mortgage rates and ballooning rents – and indeed, general costs – which have hurt tenants’ ability to save.
In total, 164,000 first-time buyers had family assistance in buying their first home in 2023, accounting for 57 per cent of all mortgaged first-time buyers – the highest figure since 2012.
“While many homebuyers enjoyed record low interest rates during the early part of the decade, more stringent mortgage requirements… have impacted high loan-to-value lending, most commonly used by first-time buyers,” Frances McDonald, director of residential research at Savills, said.
“Record rental growth and increased mortgage rates have acted as a further blow to first-time buyers’ home-owning aspirations,” McDonald added.
In fresh data released this week it was revealed that average UK private rents increased by 8.6 per cent in the 12 months to July 2024, making saving for a house a lot trickier than just cutting back on a morning frappuccino. Rents in London increased by 9.7 per cent to £2,114 per month.
One analyst described the market as a “pressure cooker ready to explode”.
“House prices are inching out of reach for many, and rents are escalating to unsustainable levels. It’s a cruel irony that the roof over your head is becoming a financial burden too heavy to bear for many,” Patricia McGirr, founder of Repossession Rescue Network, added. “It’s a social crisis in the making.”
Are things looking up?
Savills has predicted that the proportion of first-time buyer purchases receiving support will decrease from 57 per cent in 2023 to 54 per cent in 2024.
This is partly due to falling mortgage rates: The Bank of England’s decision to cut the interest rate – and the two more cuts the market has prices in for this year – has moderated mortgages and helped sentiment.
Many prospective property buyers and sellers had been holding off for interest rates to come down.
New buyer enquiries rose to in July, according to HSBC, while new seller instructions returned to growth after a very rocky June.
However, lower interest rates may not trickle down to the mortgage rates of all new buyers.
“Despite the Bank of England’s recent decision to cut the base rate, we expect that lenders will continue to favour less risky, lower LTV mortgage lending. This means that buyers will still have a hard time getting their first foot on the housing ladder,” McDonald said.
“Those who have the option of family support and are secure in their employment will find it much easier to get onto the housing ladder and only the highest earners and those who have received significant support are likely to be able to buy at the top end of the market,” she added.