A personal service, no interest rates and long or infinite repayment periods: It’s not surprising that many young adults are turning to the Bank of Mum and Dad for help to get their foot onto the property ladder.
Due to years of house price increases significantly outpacing rises in wages, making property less and less affordable, home ownership is now at its lowest levels in a generation, as first time buyers struggle to afford their own home. Baby boomers, however, have benefited from this, with the increase in value of their homes, good pensions and significant savings, many are now in a strong position to help both children and grandchildren buy.
Younger people today don’t have the same opportunities that the baby boomers had, including affordable housing, defined benefit pensions and free university education, making it harder to save for the deposits needed to take the first step onto the property ladder. This combined with the current housing crisis, with not enough homes being built, has meant that over 57% of 500 surveyed 20-34 year olds are unsure if they will ever own their own property. For many aspiring homeowners, it is impossible to buy without help from family and friends.
According to research by Legal & General, parents are predicted to lend more than £6.5Bn this year to help their children get on the property ladder, a 30% increase on the £5bn loaned in 2016. This £6.5bn figure is similar to the amount lent by the country’s ninth-biggest mortgage lender, Yorkshire Building Society. In total the bank of mum and dad will help fund £75bn worth of property purchases in 2017, including deposits for more than 298,000 mortgages.
This parental lending continues to grow, despite record low rates on mortgages, fulled by competition between lenders. Even though mortgage repayments have never been more affordable, high house prices in certain areas of the UK, means first time buyers without large deposits are struggling to qualify for loans.