30 Aug, 2024/ by Homeward Legal /Buyer, First Time Buyer, News
There is a continuing pace of the rise in house prices, which are announced on a monthly basis by the likes of the Halifax, Nationwide, Rightmove and Zoopla, among others.
With it, there comes a general air of despair from those anticipating a challenging chance to step onto the first run of the property ladder.
At the same time, there is an opposing faction - those who want to sell their home - who are rubbing their hands with glee as the house price increases (assuming their asking price is acceptable).
The problem for the growing first group is the necessity of saving for a deposit in order to apply for a mortgage to help them buy their first property. But, because the house prices are so high, the size of the loan they need is also going to be significantly raised, which therefore requires a bigger deposit, and probably one they can't afford.
For those who have no option but to rent their property (for instance, because of the proximity to available work), there is the double impact that the rent for a decent property is more than the mortgage repayments would be if only they were able to have some money to save up for that initial deposit to get that mortgage up and running.
Almost inevitably - and possibly with a sense of failure - these aspiring young people are turning to their parents and other family members for help, and taking out a loan with the assistance of the famed Bank of Mum and Dad.
We've touched on first time buyers being single back in May, but now there is a report by Savills, the estate agents for residential commercial property. In their analysis, Savills show that the Bank of Mum and Dad paid out loans and gifts to the tune of £9.4 billion in 2023.
What is more is that this figure is double what was paid out in 2019, which underlines the financial pressures on first-time buyers (FTBs) over the years. The report goes further into its analysis and shows that, in that same year, the number of first-time buyers who had such assistance accounted for 57% taking out a loan to help buy their new home.
As Frances McDonald, Savills' Director of Residential Research, notes:
“While many homebuyers enjoyed record low interest rates during the early part of the decade, more stringent mortgage requirements, which have been in place since the start of the pandemic, have impacted higher LTV [loan-to-value] lending, most commonly used by first-time buyers.
“In addition to this, record rental growth and increased mortgage rates (particularly for high LTV products) have acted as a further blow to first-time buyers' home-owning aspirations.
“As a result, a greater proportion have needed support to get onto the housing ladder, and those who were able to, took advantage of family support to try and secure a deal at a lower mortgage rate.”
However, we are now in a period of lowering mortgage rates, which means that Savills has predicted that a smaller number of first-time buyers will need to resort to the Bank of Mum and Dad in 2024, with the percentage dropping to 54% from 57% last year. But, that being said, the financial side of homebuying is subject to volatility in the markets, and this might change.
Savills has produced a table of the status of the use of the Bank of Mum and Dad (or other family assistance) and the values involved.
Year | No. of assisted FTBs | Value of assistance (£m) | % of all FTB mortgages |
2006 | 131,000 | 2,900 | 33% |
2007 | 118,000 | 2,900 | 33% |
2008 | 91,000 | 2,800 | 48% |
2009 | 135,000 | 5,100 | 70% |
2010 | 129,000 | 5,100 | 67% |
2011 | 119,000 | 4,500 | 63% |
2012 | 128,000 | 4,800 | 60% |
2013 | 136,000 | 5,200 | 53% |
2014 | 140,000 | 5,300 | 45% |
2015 | 139,000 | 5,700 | 47% |
2016 | 144,000 | 5,800 | 44% |
2017 | 148,000 | 5,900 | 43% |
2018 | 144,000 | 5,600 | 41% |
2019 | 136,000 | 5,000 | 39% |
2020 | 131,000 | 6,100 | 43% |
2021 | 198,000 | 10,700 | 49% |
2022 | 171,000 | 8,900 | 46% |
2023 | 164,000 | 9,400 | 57% |
2024* | 163,000 | 9,300 | 54% |
2025* | 174,000 | 10,100 | 51% |
2026* | 170,000 | 10,100 | 50% |
* forecast
Source: Savills
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