Half of all first-time buyers will only get on the property ladder in the next three years due to cash from their parents, according to figures from a leading estate agent.
The true extent of the financial struggles faced by first-time buyers are laid bare by the Savills research.
It found that 47 per cent of all first home purchasers will not be making the financial move alone. It equates to almost half a million first-time buyers, at 470,000.
Half a million first-time buyers will receive financial assistance with a deposit in the next three years, according to Savills research (stock image)
In total, Savills calculated that it translates to £25billion which will be gifted and loaned by the Bank of Mum and Dad between 2022 and 2024.
It is based on mortgage data provided by the mortgage trade body UK Finance, which uses sold prices.
Number of first-time buyers receiving family assistance and amount of assitance given to get on the housing ladder (* forecasts)
It comes amid rising annual house prices, with Nationwide revealing this week that values have increased 11 per cent in the year to July.
And the 0.1 per cent monthly increase means prices have risen for 12 consecutive months in a row, keeping annual price growth in double digits for the ninth month in a row.
Banking giant Halifax said that house prices had dipped slightly in the same month, but the average home still costs £293,221 and annual property inflation is at 11.8 per cent.
The rapid rise in prices means that first-time buyers are struggling even more than previously to keep their savings for a deposit increasing at the same pace as property values, Savills said.
Meanwhile, after yesterday’s increase the Bank of England base rate has risen from 0.1 per cent last December to 1.75 per cent now, pushing mortgage rates up substantially.
This is Money’s mortgage comparison calculator can potential borrowers work out 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.
First-time buyers are struggling to save for a deposit as house prices continue to rise
Has Bank of Mum & Dad lending peaked?
Savills went on to highlight how a total of 198,000 first-time buyers had financial help to get their mortgage in 2021, around 49 per cent of all mortgaged first-time buyers, up from 131,000 in 2020 and 136,000 in 2019.
The Bank of Mum and Dad contributed a total of £10.7billion towards the purchase of these homes – more than double 2019, or 115 per cent higher – as a result of a more stringent mortgage market since the start of the pandemic, which particularly affected lending to those with a smaller deposit.
Frances McDonald, of Savills, said: ‘Help from the Bank of Mum and Dad peaked last year as lenders exercised rate increases across high loan-to-value loans.
‘This meant more buyers looking to take their first step onto the housing ladder needed to take advantage of any family support to try and secure a deal at a lower rate.
‘However, as ratios normalise over the course of this year, we can expect family assistance to fall back to levels seen prior to 2021 – at around £8.4billion.
‘We are also anticipating that first-time buyer transactions will fall back in 2022, in line with overall transactions, and so the proportion who are receiving help from family – at 43 per cent – will remain above pre-pandemic levels of 39 per cent in 2019 and 41 per cent in 2018.’
Savills said the property the market will be’ increasingly confined to the highest earners and those who have received significant support’
Savills explained that Help to Buy – which supported 40,000 loans to first-time buyers and provided £2.9bn of financial assistance – brought the total support received by first-time buyers to more than £13.6billion in 2021.
However, this will end in March 2023, removing support that tens of thousands of homeowners have relied on.
Mrs McDonald added: ‘Despite strong levels of activity and price growth across the board, lenders are continuing to favour less risky, lower loan to value mortgage lending, which means it remains difficult for first-time buyers to get on the ladder.
‘Those who have the option to turn to family members for help and are in secure employment will find it much easier to get onto the housing ladder.
‘This means that the market will be increasingly confined to the highest earners and those who have received significant support.’
‘Despite higher interest rates, the main barrier to home ownership is still buyers’ ability to save for a deposit.
‘This is particularly true with the rising cost of living and so the role of the bank of Mum and Dad will remain a key avenue of support to those able to access it. This will be all the more vital from March 2023 when Help to Buy closes, with more first time buyers looking to plug a hole in their deposit gap.’