Bank of Mum and Dad now helps a third of first-time buyers

MORE than a third of first-time buyers are now turning to their family for a financial gift or loan to help them buy a home, a government advisory group has warned.

Just seven years ago, only one in five of those trying to get on the property ladder relied on the so-called “bank of Mum and Dad”.

The high proportion of first-time buyers relying on handouts is making inequality worse as home ownership becomes a “distant dream” for millions on low incomes, the Social Mobility Commission said.

As well as 34 per cent of first-time buyers using a family gift or loan to help them buy a home, a further one in 10 relies on inherited wealth, the analysis by Cambridge University and Anglia Ruskin University researchers found.

Home ownership has fallen among 25- to 29-year-olds by more than half in the last 25 years, from 63 per cent in 1990 to 31 per cent in the most recent figures, the report said.

Alan Milburn, a former Labour cabinet minister who chairs the commission, said: “Owning a home is becoming a distant dream for millions of young people on low incomes who do not have the luxury of relying on the bank of Mum and Dad to give them a foot up the housing ladder.

“The way the housing market is operating is exacerbating inequality and impeding social mobility.” The researchers found that around a third (30 per cent) of UK households with dependent children have assets that could be used towards a deposit for a home, but the figure drops to 10 per cent for households with no formal educational qualifications over two successive generations.

They predicted that the number of first-time buyers would rise slightly in the short term and then fall gradually over the next 25 years, with the speed and extent of both dictated by the performance of the economy.

If the economy weakens, the proportion of first-time buyers relying on their parents will rise to nearly 40 per cent by 2029. If the economy improves, the proportion is expected to peak at 39 per cent by 2021-22.

A Department for Communities and Local Government spokesman said: “We’re clear that to fix the broken housing market we need to build more homes and improve affordability. Our recent housing white paper set out the measures to do just that.”