In the next three years, half of all first-time buyers will only be able to purchase a home with the help of their parents, according to data from a renowned estate agent.
The analysis conducted by Savills reveals the true depth of the financial difficulties first-time buyers confront.
It was discovered that 47% of all first-time homebuyers will not be making the financial shift alone. This number, 470,000, represents over half a million first-time purchasers.
Between 2022 and 2024, Savills estimates that a total of £25 billion will be bestowed and loaned by the Bank of Mum and Dad.
It is based on mortgage data provided by the trade association for the mortgage industry, UK Finance, which utilizes sales prices.
It comes amid growing annual home prices, with Nationwide announcing this week that values have risen 11% year-to-date through July.
And the 0.1% monthly increase means prices have risen for 12 consecutive months, maintaining double-digit annual price growth for the ninth consecutive month.
According to the banking giant Halifax, house prices fell marginally during the same month, but the average home still costs £293,221 and annual property inflation is 11.8%.
According to Savills, the quick increase in prices has made it more difficult than ever for first-time buyers to keep their savings for a down payment growing at the same rate as property values.
Meanwhile, following yesterday’s hike, the Bank of England’s base rate has risen from 0.1 percent in December 2012 to 1.75 percent today, resulting in a considerable increase in mortgage rates.
This is Money’s mortgage comparison calculator allows prospective borrowers to estimate their monthly payments and view loans for which they may qualify, based on the home’s value and mortgage size.
Has the Bank of Mom and Dad reached its maximum level of lending?
In 2021, almost 49 percent of all first-time buyers with a mortgage will receive financial assistance to obtain a mortgage, up from around 131,000 in 2020 and 136,000 in 2019.
As a result of a more stringent mortgage market since the onset of the pandemic, which particularly hindered lending to people with a lower deposit, the Bank of Mum and Dad donated a total of £10.7billion towards the acquisition of these properties – more than double 2019, or 115% more than in 2019.
Frances McDonald of Savills stated, ‘The Bank of Mom and Dad reached its zenith last year as lenders increased interest rates on high loan-to-value loans.
This resulted in a rise in the number of first-time homebuyers who had to rely on family assistance to acquire a cheaper interest rate.
‘However, if ratios normalize over the course of this year, we may anticipate family aid to return to levels seen before in 2021, which is approximately £8.4billion.
We also anticipate that the number of first-time buyer transactions will decline in 2022, by the total number of transactions. As a result, the proportion of first-time buyers seeking assistance from their families will remain above pre-crisis levels of 39% in 2019 and 41% in 2018.
Help to Buy, which supported 40,000 loans to first-time buyers and offered £2.9 billion in financial help, raised the total support received by first-time buyers in 2021 to over $13.6 billion, according to Savills.
Tens of thousands of homeowners have relied on this assistance, but it will be discontinued in March 2023.
Mrs. McDonald continued, “Despite robust levels of activity and price growth across the board, lenders continue to favor less risky, lower loan-to-value mortgage lending, making it difficult for first-time buyers to climb the property ladder.”
Those who can resort to family members for assistance and have a stable job will find it much easier to climb the housing ladder.
This means that the market will be more restricted to individuals with the greatest incomes and those who have received substantial assistance.
Despite rising interest rates, buyers’ capacity to save for a down payment remains the most significant barrier to homeownership.
This is especially true in light of the rising expense of living, thus the role of the bank of Mum and Dad will continue to be an important source of support for those who can access it. When Help to Buy expires in March 2023, more first-time homebuyers will be searching for a way to overcome their deposit gap, making this a need.”
