- More than half of mortgaged first-time buyers received support in 2023
The Bank of Mum and Dad is expected to pay out almost £30billion over the next three years to give their children a boost up on to the property ladder.
According to the property agents Savills, £9.4 billion was handed to first-time buyers in 2023 – a year in which property transactions dropped by around 20 per cent.
While fewer first-time buyers purchased last year, those that did required more help due to higher mortgage rates.
In total, 164,000 first-time buyers had family assistance in buying their first home – or 57 per cent of all first-time buyers with mortgages.
Helping hand: Gifts and loans from the Bank of Mum and Dad totalled £9.4 billion in 2023 – supporting 164,000 first-time buyers
This was the highest proportion of first-time buyers to receive help since 2012, and is 10 per cent up on 2022.
A total of £30 billion is expected to be paid out by parents to their adult children between 2024 and the end of 2026.
While the total number of first-time buyers receiving financial help from family is down from 198,000 peak in 2021, Savills says the amount being loaned or gifted has almost doubled since 2019.
Frances McDonald, director of residential research at Savills said: ‘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 [lower deposit] lending, most commonly used by first-time buyers.
‘In addition to this, record rental growth and increased mortgage rates 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.’
Cheaper mortgages to cut parents’ contributions
In recent weeks, mortgage rates have been falling with lenders competing fiercely to win business.
As mortgage rates continue to decrease, Savills has forecast that a smaller proportion of first-time buyers are likely to need support from the Bank of Mum and Dad.
The proportion of first-time buyer purchases receiving support will decrease from 57 per cent in 2023 to 54 per cent this year, it has suggested.
Savills forecasts the total contribution towards first-time buyer purchases will remain in line with 2023 levels (£9.3bn).
‘Despite the Bank of England’s recent decision to cut the base rate, we expect that lenders will continue to favour less risky, lower loan-to-value mortgage lending,’ added McDonald.
‘This means that buyers will still have a hard time getting their first foot on the housing ladder.
‘Those who have the option of family support and are secure in their employment will find it much easier to get onto the housing ladder and only the highest earners and those who have received significant support are likely to be able to buy at the top end of the market.’