34% of first-time buyers relied on their parents for financial help, making the ‘bank of mum and dad’, the equivalent of the UK’s ninth largest lender in 2017.
If you’re trying to get on the housing ladder, you’ll know how hard it can be:
- The average price of a first home is over £200,000 in the UK (and £400,000 in London)
- The average first-time buyer deposit has more than doubled over the past decade from £15,168 in 2006 to £32,321 in 2016
- Only 29% of all first-time buyer purchases in 2016 were below the £125,000 Stamp Duty threshold.
- 28% of all first-time buyers with a mortgage opted for a 30 to 35 year mortgage term (in 2016)
With numbers like those left it’s little wonder that so many first-time buyers turned to their parents for financial support in helping them buy their first home. In fact, according to a recent report from Legal and General, the bank of mum and dad could lend more than £6.5bn in 2017, a massive 30% increase on 2016.
The money will help to buy £75bn worth of property and puts parents on a par with the UK’s ninth largest mortgage lender, the Yorkshire Building Society.
Is parental support sustainable?
The bank of mum and dad makes an average financial contribution of £21,600 for each property. And of the buyers who received support from their family, 57% received it in the form of a gift while just 5% were given the money as a loan with interest.
According to Legal and General a loan by the bank of mum and dad could wipe out just over half of a family’s available net wealth, raising the question of whether this type of support is sustainable over the longer term.
If you’re looking to buy your first house with help from your family, we can help you find an appropriate mortgage deal for you.
If you’re still in the process of saving your deposit (typically 16% of the value of an average first home), we can help you explore the different ways to invest for your near, mid and long-term plans.