Half of all first-time buyers will only climb the property ladder in the next three years because of their parents’ cash, according to figures from a major real estate agent.
Savills’ research uncovers the true extent of the financial difficulties first-time buyers face.
It found that 47 percent of all first-time homebuyers won’t make the financial move on their own. That equates to almost half a million first-time buyers, 470,000.
Half a million first-time buyers will receive financial assistance with a deposit over the next three years, according to Savills research (file image)
In total, Savills calculated that translates to £25bn to be donated and loaned by the Bank of Mum and Dad between 2022 and 2024.
It is based on mortgage data provided by the UK Finance mortgage trading body, which uses selling prices.
Number of first-time homebuyers receiving family assistance and amount of assistance provided to access the housing ladder (* forecasts)
It comes amid rising annual home prices, and Nationwide revealed this week that values have risen 11 percent in the year to July.
And the 0.1 percent monthly increase means prices have risen for 12 straight months, keeping annual price growth in double digits for the ninth straight month.
Banking giant Halifax said house prices had dipped slightly in the same month, but the average house still costs £293,221 and annual property inflation is 11.8 percent.
Rapidly rising prices mean first-time homebuyers are struggling even more than before to keep their savings for a deposit rising in step with property values, Savills said.
Meanwhile, after yesterday’s hike, the Bank of England base rate has risen from 0.1 percent last December to 1.75 percent now, raising mortgage rates substantially.
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First-time buyers struggle to save for a deposit as home prices continue to rise
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Savills went on to highlight how a total of 198,000 first-time homebuyers received financial help to get their mortgage in 2021, about 49 percent of all first-time homebuyers with a mortgage, up from 131,000 in 2020 and 136,000 in 2019.
The Bank of Mum and Dad put up a total of £10.7bn towards the purchase of these homes, more than double that of 2019, or 115% more, as a result of a tighter mortgage market since the start of the pandemic, That especially affected lending to those with a smaller deposit.
Frances McDonald, of Savills, said: ‘Aid from the Bank of Mum and Dad peaked last year when lenders exercised rate increases on high loan-to-value ratio loans.
‘This meant that more buyers looking to take their first step up the housing ladder needed to take advantage of any family support to try and secure a lower rate deal.
“However, as ratios normalize over the course of this year, we can expect family assistance to fall back to levels seen before 2021, by around £8.4bn.
“We also anticipate first-time buyer transactions to recede in 2022, in line with overall transactions, so the proportion receiving help from family, at 43 percent, will remain above pre-departure levels. pandemic of 39 percent in 2019 and 41 percent in 2018.’
Savills said the property market will be ‘increasingly confined to the top earners and those who have received significant support’
Savills explained that Help to Buy, which supported 40,000 first-time buyer loans and provided £2.9bn in financial assistance, brought total support received by first-time buyers to more than £13.6bn in 2021.
However, this will end in March 2023, removing the support that tens of thousands of owners have relied on.
Ms McDonald added: “Despite strong activity levels and overall price growth, lenders continue to favor lower-value, less risky home loans, meaning it remains difficult for first-time homebuyers to jump on to the ladder.”
‘Those who have the option of turning to family members for help and have secure employment will find it much easier to climb the housing ladder.
“This means the market will become increasingly limited to top earners and those who have received significant support.”
‘Despite higher interest rates, the biggest barrier to homeownership remains the ability for buyers to save for a deposit.
‘This is particularly true with the rising cost of living and therefore the role of the mom and pop bank will continue to be a key avenue of support for those who can access it. This will be even more vital from March 2023 when Help to Buy closes, with more first-time buyers looking to plug a hole in their deposit gap.