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
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.
However, parents ability to fund a deposit for a home for their offspring must be becoming more and more of a struggle, and where are the rules dictating that parents have to step up to the mark.
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. No, this was not good either, and those who took up the offer could well be in negative equity today but if they are making their repayments, at least they have a place that really is their own.
It’s natural that parents 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 parents to assist their offspring in purchasing a property, even when they might be struggling to make their own mortgage repayments.
While it’s in our genes and our cultural 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, such as Barclays ‘Family Springboard’ and Lloyds ‘Lend a Hand’, 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.
And as ever with the borrowing or lending of money, stress and heightened-emotion often come along for the ride.
A recent survey from the Equity Release Council found that parents who provide financial support to adult children often suffer distress, with almost a third of people aged 18 to 54 turning to their parents when they need cash; almost three in ten of these were adults aged 35 to 44.
Furthermore, one in ten families goes so far as to keep secrets from each other to conceal that the money was lent, according to the Council, probably not the best idea for a healthy dynamic.
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, their children won’t even have the option to turn to mom and dad to release equity, 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.
So, if we can’t look to our parents, where is the hope?
Firstly, the housing supply needs to be tackled and developers encouraged to build in the cities and suburbs, where first-time buyers actually want to live and have access to work, not in the dark depths of nowhere. And while the government has made a stab at improving the situation with schemes such as First Buy, New Buy and shared ownership, if they are really to make an impact,w availability and accessibility need to be advanced ten-fold. While it’s a start, there’s a long road ahead before many of us reach the front door we actually own.
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