The majority of people who own their own property have contributed or plan to contribute to their children’s mortgage deposits, new research has found.
The Halifax Generation Rent Report shows that 57 per cent of parents who are homeowners have helped their offspring onto the property ladder or plan to do so. This compares to only 24 per cent of parents who rent.
The proportion of homeowners who are willing and plan to become a guarantor on a mortgage for their children is also considerable higher (24 per cent) than that of parents who rent (7 per cent).
As parental help is evidently more important for the people who want to get on the property ladder, it is interesting to note that parents who own their own home are more likely to help their children than those who rent. This clearly emphasises the importance of property ownership for the prosperity of future generations, Halifax points out.
Looking at how parents have supported their children in buying their first home, it becomes apparent that direct parental contributions towards the costs of a mortgage have remained steady.
While a contribution towards a deposit has remained the single largest type of contribution the numbers have remained steady. The only increase in the last four years has been those helping with the actual costs of moving house.
The Generation Rent Report contains data from interviews with over 40,000 20-45 year olds built up over five years, and over 4,000 parents of 20-45 year olds over the last four years. In recent years, it has shown parents and Generation Renters were both more pessimistic about the first-time buyer market (with 21 per cent of parents and 29 per cent of prospective first-time buyers saying it was virtually impossible three years ago in 2012).
However, with improving economic conditions and an increasing number of first-time buyers since then, both parents and prospective first-time buyers have become more optimistic – although more than a fifth of Generation Renters still believe it’s virtually impossible.
Parents are more optimistic than their offspring though. The report found that just 12 per cent of parents believe it is ‘virtually impossible for first-time buyers to obtain a mortgage’ this rises to 21 per cent of prospective first-time buyers.
Craig McKinlay, Mortgage Director, Halifax, commented:
“The Generation Rent Report shows a clear divide between parents and their children as regards optimism over getting on the housing ladder. In reality there are more mortgages available which require a 5% deposit and first-time buyer numbers are increasing. But whether it is giving their children a cash lump sum or providing a roof over their heads while they save, it is clear the bank of mum and dad will have a role to play in helping their children get on the property ladder for the foreseeable future.”
| How parents have helped their children get onto the property ladder | ||||
| 2012 | 2013 | 2014 | 2015 | |
| Obtain a mortgage on their child’s behalf | 1% | 1% | 1% | 2% |
| Buy a property with their child | 4% | 4% | 5% | 4% |
| Contribute to monthly mortgage payments | 6% | 6% | 6% | 6% |
| Be a guarantor on a mortgage | 7% | 7% | 5% | 5% |
| Contribute to the cost of moving house | 17% | 20% | 17% | 21% |
| Contribute towards a deposit | 26% | 27% | 22% | 26% |
