With property prices outstripping average wage growth, the reality is that first-time homeowners simply can’t save as quickly as the property price increases year on year.
Just last month, data from Douglas and Gordon revealed that average flat prices are up by 19.2% and that buyers are paying £172 more per square foot today than they did five years ago.
“Considering the rise in house prices across the UK over the last few years, including a dramatic increase in the capital, it’s no surprise that more first-time property buyers than ever before are relying on their parents for help with a deposit”, says Alice Ramsey, Marketing Executive at Douglas and Gordon and a first-time buyer who discussed the impact of the budget with the BBC last month.
Douglas and Gordon have compiled information surrounding the issue through research from various sources, including Gov.uk and Legal and General.
They have found that parents are set to lend a massive £6.5 billion in 2017, meaning the Bank of Mum and Dad is virtually on par with the UK’s 9th largest mortgage lender.
The Bank of Mum and Dad
Around 29% of first-time buyers have help from friends and family when buying property. According to the research, between 2015 and 2016, a staggering 654,000 households took the leap to become first-time buyers in the UK. Of these, 66% were couple households, where two people go in for a mortgage together. With low-interest rates, most can afford repayments, yet 69% of them say that without the help of their parents for a deposit, they would have been unlikely to have made their purchase in the first place.
In addition to low-interest rates and assistance from parents, there is a growing trend among first-time buyers towards longer mortgage terms, according to a 2017 press release from Halifax bank. In 2006, only 35% opted for mortgages taken over 25-years compared to 60% today. In addition, the average age of people entering the UK property market for the first time has increased to 30 years-old and is highest in London at 32 years-old.