Half of all starters will only reach the real estate ladder in the next three years thanks to money from their parents, according to figures from a leading broker.
The true scale of the financial problems that start-ups face is uncovered by Savills’ research.
The survey found that 47 percent of all first home buyers will not take the financial step alone. It amounts to almost half a million new buyers, at 470,000.
Half a million start-ups will receive financial aid with a down payment over the next three years, according to research by Savills (stock image)
In total, Savills has calculated that translates to £25 billion to be donated and lent by the Bank of Mum and Dad between 2022 and 2024.
It is based on mortgage data provided by the mortgage trading organization UK Finance, which uses sales prices.
Number of starters receiving family assistance and amount of help given to get up the housing ladder (* forecasts)
It comes amid rising annual home prices, with Nationwide revealing this week that values are up 11 percent in the year to July.
And the monthly increase of 0.1 percent means prices have risen for 12 consecutive months in a row, leaving annual price growth in double digits for the ninth straight month.
Banking giant Halifax said house prices had fallen slightly in the same month, but the average home still costs £293,221 and property inflation remains at 12.5 percent.
The rapid rise in prices means first-time buyers are finding it even more difficult than before to grow their down payment savings at the same rate as real estate values, Savills said.
Meanwhile, following yesterday’s hike, the Bank of England’s key rate has risen from 0.1 percent in December last year to 1.75% today, pushing mortgage rates up significantly.
This is money Mortgage Comparison Calculator Potential borrowers can calculate how much their monthly payments would be and show the loans they could potentially apply for, based on a home’s value and mortgage size.
New buyers struggle to save for a down payment as house prices continue to rise
Has lending to the Bank of Mum & Dad peaked?
Savills went on to highlight how a total of 198,000 first-time homebuyers received financial assistance to get their mortgage in 2021, roughly 49 percent of all first-time homebuyers, up from 131,000 in 2020 and 136,000 in 2019.
The Bank of Mum and Dad contributed a total of £10.7bn to the purchase of these homes – more than double that of 2019, or 115 percent more – as a result of a tighter mortgage market since the start of the pandemic, which mainly involves borrowing to people with a smaller deposit.
Frances McDonald, of Savills, said: ‘The Bank of Mum and Dad’s aid peaked last year as lenders introduced rate hikes on high loan-to-value loans.
This meant that more buyers looking to take their first step up the housing ladder had to take advantage of any family support to try and close a deal at a lower rate.
“However, as the proportions normalize over the course of this year, we can expect home help to fall back to pre-2021 levels – around £8.4bn.
“We also expect first-time buyer transactions to fall in 2022, in line with total transactions, and so the proportion receiving help from family – at 43 percent – will remain above the pre-pandemic level of 39 percent. in 2019 and 41 percent in 2018.’
Savills said the property on the market will be “increasingly limited to the highest earners and those who have received significant support”
Savills explained that Help to Buy – which supported 40,000 loans to new buyers and provided £2.9 billion in financial aid – brought the total aid new buyers received in 2021 to more than £13.6 billion.
However, this will end in March 2023, taking away the support that tens of thousands of homeowners have relied on.
Ms McDonald added: ‘Despite strong activity levels and price increases across the board, lenders continue to prefer less risky mortgages with lower credit ratings, meaning it remains difficult for first-time buyers to get up the ladder.
“Those who have the ability to turn to relatives for help and have steady jobs will find it much easier to get up the housing ladder.
“This means that the market will increasingly narrow down to the highest earners and those who have received significant support.”
“Despite higher interest rates, buyers’ ability to save for a deposit is still the main barrier to owning a home.
“This is especially true with the rising cost of living and so the role of Mom and Dad’s sofa will continue to be an important source of support for those who have access to it. This will be all the more important from March 2023, when Help to Buy closes, with more new buyers looking to fill a gap in their deposit gap.”