Bank of mum and dad drying up once again

First-time buyers are once again in the spotlight as numbers apparently increase, while the bank of mum and dad is running out of credit, writes Rebekah Commane

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Unsurprisingly, media focus has once again turned to first-time buyers, with an apparent upturn in the numbers purchasing a first home early in the year. According to LSL Property Services numbers rose 15 per cent in April, allegedly due to the availability of low rate deals and more choice in the market.

The average price of property even soared to a high of £138,000 (obviously, the average was much higher in London) and still the numbers rose. Hard to believe for those who are struggling to make ends meet that so many first-time buyers have appeared out of the woodwork.

But once again, statistics prove that the majority of these buyers are assisted by the ‘bank of mum and dad’, so they’re not a true reflection on affordability in the market.

It’s the same old ding-dong: rents are too high to allow potential buyers to save for a deposit.

Figures from the Council of Mortgage Lenders show that last year only 36 per cent of first-time buyers managed to get onto the housing ladder without outside help, compared to more than 60 per cent in 2006, before the credit crunch.

Meanwhile, parents ability to fund a deposit for a home for their offspring is inevitably becoming more and more of a struggle as the cost of living increase and fewer retired parents have disposable pensions to draw on.

And where are the rules written that dictate that those who have worked their whole lives to build a nest-egg for their twilight years should have to hand it over because the housing market is in crisis? And why should they put their homes in jeopardy at a time when stability and comfort is most needed?

Now it emerges that second-steppers (those purchasing a second property) are also looking to the bank of mum and dad.

Lloyds banking group recently released statistics showing that 18 per cent of those surveyed are considering asking their family to fund a further step up the property ladder.

And if mum and dad can’t help, the next option now appears to be turning to the institution that is granny and grandad.

A few short years ago young people with any sort of bank account at all were being contacted out of the blue and offered 100 per cent mortgages. Of course this wasn’t an ideal situation either, and so many of those who purchased before the boom are now in negative equity. But if they are making their repayments, at least they have a place that really is their own.

It’s natural that caring family members want to give their children a piggy back, or ‘piggy bank’ onto the property ladder when possible but it’s a frustrating thing for those who don’t have family to rely on. While anyone would take what financial help they can to get on the garden path to their very own home, those without it, and who are scraping together the pennies for a deposit, can be left feeling despondent handing over their ever-decreasing wages each month to pay someone else’s mortgage.

The figures focusing on assisted first-time buyers also places an unfair sense of obligation on family to assist their kin in purchasing a property, even when they might be struggling to make their own mortgage repayments.
While it’s in our genes and our culture to want to own our home, the majority of the older generation won’t have had help when buying their own property. But the direction the market has taken is putting added pressure on parents to help out; some are even getting into further debt in their retirement years to help foot the bill for the kids.

Many of the mortgage schemes out there are marketed at parents, with a little bit of guilt-tripping thrown in, and are based on relatives forking out a 5 per cent deposit as security, in case the unpredictable new buyer fails to make payments.

Not only do parents worry about their children’s finances when they are adults, but apparently nearly half have already begun worrying that they won’t be able to help their children while their sons and daughters are still ‘in short pants’.

The worrying question is, what will happen to the property market by the time the next generation rolls around? With the majority of 25 to 34 year olds in London renting, many children won’t even have the option to turn to mom and dad, and with the average property deposit expected to reach £100,000 by 2020, it seems homeownership could be an unachievable dream if the status quo in the market  continues.

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