‘Bank of mum and dad’ expected to give a leg-up to half of all first-time buyers this year

THE so-called “bank of mum and dad” will help half of all first-time buyers this year, with the average contribution hitting £58,000.

Parents are expected to hand out a record £9.8 billion to their children in 2021, according to estate agent Savills.

The figure shot up as first-timers were shut out of borrowing by risk-averse lenders during the pandemic, while house prices soared. The share of new entrants to the property market relying on family funding is at its highest since 2013 – the same year the Government’s Help to Buy scheme launched. However, dependency on parents remains some way off its peak of 2009, when 70 per cent of first-time buyers needed a boost in the aftermath of the financial crisis.

The contribution is up from £6.1billion in 2020 when the average amount was £47,000. Frances Clacy, of Savills, said: “Despite strong levels of activity and price growth across the housing markets, lenders have tended to favour less risky, lower loan-to-value lending, making it harder for new buyers to get on the ladder without assistance.”

In early March 2020, there were 391 mortgages requiring a 5 per cent deposit, according to data firm Moneyfacts. When the housing market effectively closed later that month, this fell to almost zero, and one year later there were still only five deals available. Availability has crept back up to 225 since the Government introduced its 95 per cent mortgage guarantee scheme in April.

The shortage of mortgage deals was compounded by a soaring property market. According to lender Halifax, house prices rose at the fastest pace in more than 14 years in September – to a record average of £267,587. An acute shortage of properties for sale also meant first-time buyers were pitted against people moving house and investors, who were boosted this year by the stamp duty holiday.

Aneisha Beveridge, of estate agent Hamptons said the housing market had been driven by older homeowners this year, many of whom released equity to give to their children. Savills expects family support to drop to £7.9billion in 2022 as lenders relax deposit requirements as the economy recovers.

But Ms Clacy warned family support would remain a “vital” source of funding. “While we expect lending for borrowers with smaller deposits to continue to be available, slowly rising interest rates will act as a brake on affordability.”

The Help to Buy scheme is also due to end in 2023, creating a potential black hole for first-time buyers. It has restricted borrowers to new-builds, which has posed a problem for some buyers as newly-built properties are typically more expensive than secondhand homes.