Mum and dad’s lifeline for young house buyers
THE Bank of Mum and Dad is now helping to fund one in every two house purchases among under-35s, research suggests. Legal & General said 56 per cent of first-time buyers under 35 had received financial help from parents to get them on the property ladder.
Nearly three-quarters (71 per cent) would not have been likely to buy without financial help from family or friends, it found.
Instead, they would have had to delay their housing plans by four years on average.
Legal & General chief executive Nigel Wilson said: “The Bank of Mum and Dad’s role in Britain’s housing market is ubiquitous.
“These generous lenders are often funding most or all of the deposit buyers need to step on to or up the ladder.
“But this remains a symptom of a broken housing market. Thousands of people simply don’t have a Bank of Mum and Dad to rely on.
“For those that do, generous family members are still having to draw on retirement savings and rainy day funds, even as the country experiences its most significant economic challenge since the Second World War.”
Legal & General research also shows that the Bank of Mum and Dad is giving £19,000 on average to first-time buyers under the age of 35.
And it is not just the younger generation receiving support. Nearly one in 10 (9 per cent) over-55s planning to buy said they would have had to delay their purchase without financial support from their parents. Bank of Mum and Dad lenders are still eager to help out, despite many seeing their incomes dented by the impact of Covid-19.
Nearly three quarters (74 per cent) of those who have seen their incomes fall during the pandemic said the crisis had made them no less willing to help loved ones on to the property ladder.
The research included a survey of more than 1,900 adults who have bought a home or are planning to buy in the next five years, and more than 500 parents and grandparents. Meanwhile, the number of mortgage products on the market is continuing to shrink after halving earlier this year, analysis has found.
And the number of 5 per cent deposit mortgages to choose from is now barely in double digits, Moneyfacts.co.uk found.
Across the market, there are now 2,259 deals of all deposit sizes to choose from, including fixed and variable rates, Moneyfacts said.
In March, there were 5,222 deals across all deposit sizes to choose from, but as the coronavirus lockdown set in the number of products available soon halved, sitting at 2,566 by May.
In the 5 per cent deposit market, often relied upon by first-time buyers, there are just 12 deals available, a small fraction of the 391 deals available in March.
Moneyfacts said 15 per cent is the minimum deposit size that many providers now require - and low or no deposit deals often require a family member to give some sort of assistance to secure the mortgage. This could be in the form of parental savings which are linked to the mortgage.
Prime Minister Boris Johnson recently pledged to turn “generation rent into generation buy”, with new long-term, fixed-rate mortgages with deposits as low as 5 per cent. Specific details about exactly how these deals will work have not yet been disclosed.
Eleanor Williams, a finance expert at Moneyfacts, said average mortgage rates have also been increasing recently.
In June, the average five-year fixed-rate across all deposit sizes was 2.26 per cent, but now it is 2.62 per cent.
Ms Williams said firms are likely to be factoring the added risks of lending in the uncertain economic environment into their mortgage rates.