As if first-time buyers didn’t have enough to contend with, it would seem there are now problems accessing cash from the Bank of Mum and Dad.
High living costs are impacting parents’ ability to help fund children’s deposit, according to new research by Aldermore, and this is wrecking the homebuying plans of three out of five first-time buyers.
The survey of 2,000 prospective first-time buyers revealed many parents have had to scale back or remove support altogether.
Jon Cooper, director of mortgages at Aldermore, said: “The Bank of Mum and Dad has become a fixture of homebuying in the UK.
“Dipping into cash savings has long been commonplace for parents helping their children but they are beginning to feel the pinch when it comes to this support.”
Aldermore’s analysis found one in five prospective first-time buyers expected their loved ones to pay approximately half of their overall deposit, which is approximately £24,790.
Seeing this support decrease can lead to possible delays for those relying on help to get on the ladder, warned the mortgage lender.
How are parents finding the money for first-time buyers?
Aldermore said the most common way families assisted in raising a deposit was by gifting cash savings.
But many parents were also making great sacrifices to help out. Indeed, 16% sold a second property, 15% downsized their main property, 17% took lump sums from their pensions and 9% remortgaged their property.
However, nearly one in 10 (8%) prospective first-time buyers were unaware how their family members were funding the money to help them bridge the gap.
Parents were also taking extra steps to help their children save towards their deposit. One in six (18%) prospective first-time buyers lived with their parents rent free in the run up to buying their first home.
Cooper added: “While gifting to children is admirable, it’s important that families don’t overextend themselves or compromise their own finances in providing support to their children.
“I’d advise any buyer to seek the expertise of a broker, who can help navigate the more delicate and complex aspects of getting on the property ladder.”
