The struggles facing young people as they try to get onto the property ladder are impacting the financial future of their parents and families.
In-depth research conducted by Halifax, the UK’s largest first time buyer lender, and the NatCen Social Research shows:
- Half of 20-45 year olds think that Britain will become a nation of renters within a generation
- The reliance on the Bank of Mum and Dad leaves a third of parents concerned for their own financial future
- Just 14 per cent of non homeowners between 20-45 years old are actively saving for a deposit
- Only 8 per cent of parents believe first time buyers should borrow money for a deposit, yet 44 per cent have, or have plans to contribute an average of £12,800
- 24 per cent of parents have had their children move back home as adults due to the current market
Stephen Noakes, mortgage director at Halifax, commented: “Our research shows that one year on, young people are still downbeat about their chances of owning a home, and we’re also seeing the impact this has on their parents’ financial future. Parents think that their kids could make cutbacks on holidays and going out in order to save for a deposit. However, despite concern for their own financial future, parents continue to stump up a contribution or welcome their children back to the nest to allow them to save.
Alison Park, head of society & social change at NatCen Social Research, said: “Parents are not very keen on their children borrowing money from family and friends as a way of contributing towards a deposit, while younger generations are much more accepting. Both generations make similar sacrifices to buy their first home, but today’s young people are looking more and more towards their family for support.”
Just over half (54 per cent) of 20-45 year olds believe that Britain should remain a nation of homeowners, with an overwhelming 78 per cent agreeing that it is a good financial investment. However, despite this, of the 8,042 20-45 year olds questioned:
- 25 per cent do not want to own a home (an increase of two percentage points on 2011)
- Two in five (40 per cent) would like to buy a home but do not believe they will ever be able to
- Just 31 per cent have a serious intention to buy within the next five years
- 50 per cent believe Britain will become a nation of renters within a Generation (up four percentage points since 2011).
The size of a deposit, high house prices and job security are the top three barriers to home ownership according to Generation Rent. In addition, 91 per cent of parents believe that the current UK economy is discouraging first time buyers (FTB) from buying a property, in line with 87 per cent of 20-45 year olds who fear that it is a risk to buy a home in today’s economy.
Whilst the average FTB deposit in today’s market stands at £24,647, the research found that:
- 26 per cent have savings of less than £3,000 and 35 per cent have no savings at all
- On average, people aged between 20 and 45 who have savings have an average of £9,420
- Men have twice as much saved up as their female counterparts (£12,550 compared to £6,380).
However, 80 per cent admitted to spending money they could otherwise be saving for a deposit. More than a third (35 per cent) spent this money on eating out, followed by clothing (32 per cent) and holidays (31 per cent).
Alongside eliminating stamp duty for first time buyers (38 per cent), the Government’s NewBuy scheme (32 per cent) are cited as the policies which are most likely to encourage those 20-45 year olds get on the property ladder.
Nearly a quarter (23 per cent) of 20-45 year olds are relying on money borrowed from friends and family to get on the property ladder compared to 11 per cent of their parents’ generation. However, just 8 per cent of parents feel that 20-45 year olds should be borrowing money for this purpose. 79 per cent of parents believe the younger generation should instead go on fewer or cheaper holidays and 77 per cent say the younger generation should cut down on going out in order to save for a deposit.
Notably, although a quarter of today’s generation stay at home in order to save for a deposit, just 16 per cent of their parents’ generation did the same.
Over a third (38 per cent) of parents have made financial contributions to help their offspring get on the property ladder. The total amount of money family members are giving or lending to children has been estimated to have increased by 31 per cent to an average of £12,846 in the past five years.[iii]
This support manifests itself in various ways:
- 26 per cent have already contributed to a deposit and a further 19 per cent expect to do in the future
- 31 per cent of parents are dipping into their savings and14 per cent have given their child some or all of their inheritance early
- 6 per cent contribute to monthly mortgage payments or expect to do so in the future
- 24 per cent of parents have revealed that their children have at some point moved back in with them as a result of not being able to buy their own property
Parents are even more pessimistic than their children about the mortgage application process, with 66 per cent and 60 per cent respectively believing that it’s very hard or virtually impossible to get a mortgage. However, just 39 per cent of parents think that this puts people off from applying, compared to 61 per cent of 20-45 year olds.
Nearly three in five (59 per cent) potential homeowners believe that lenders accept less than 40 per cent of mortgage applications. Stephen Noakes explained: “Despite the launch of various initiatives to support first time buyers such as NewBuy, both young people and their parents share a view that it is difficult, or even impossible, for first time buyers to get a mortgage, which this is clearly a point we need to continue to address. The reality is we continue to approve eight out of 10 first time buyer applications, more than double the amount that people expect us to.”
