"The Covid-19 pandemic has only increased the difficulties faced by new buyers meaning the Bank of Mum and Dad providing support has increasingly become a necessity, rather than just a helping hand."
With the Covid-19 pandemic bringing greater barriers, including the average deposit for a first-time buyer jumping nearly £12,000 in the past twelve months to £59,000, prospective buyers are increasingly turning to their family and friends for assistance.
The percentage of first-time buyers getting help from family to fund their deposit has jumped from 22% in March 2020 to a third (33%) in March 2021.
The methods in which parents provide funding for their children’s deposit is also changing, with the traditional means of providing cash savings decreasing from 55% in March 2020 to 35% now.
Those getting assistance from inheritance increased to over a quarter (27%), from only 6% a year ago in March 2020.
38% of parents that are helping their children are doing so by remortgaging their property, up dramatically from 7% pre-Covid-19. 38% are also selling significant assets, such as a car or holiday home or releasing equity in their homes to drum up funds, a huge increase from March 2020 where just 9% of parents went to these lengths.
Other popular support for first-time buyers include downsizing (18%), selling a second/buy-to-let property (18%), taking money from pensions (17%) or stocks/shares (16%).
The Bank of Mum and Dad continue to be the main source of support, providing funds for nine in ten (93%) prospective first time buyers receiving assistance, up from 62% in March 2020. However, more members of the family are helping with the Bank of Grandma and Granddad growing from 13% pre-Covid-19 to almost half (45%) of prospective first-time buyers receiving assistance.
There is also a sudden trend of prospective first-time buyers seeking to buy or receive funds from outside the family, turning to friends for support or to buy together. A sixth (15%) are asking to in part fund their deposit this way, compared to just 11% twelve months ago.
Jon Cooper, head of mortgage distribution at Aldermore, said: “Young people have had a stark fall in home ownership the past two decades, as the challenging environment of high house prices, shortage of suitable homes, and weak wage growth have hindered home buying chances. The Covid-19 pandemic has only increased the difficulties faced by new buyers meaning the Bank of Mum and Dad providing support has increasingly become a necessity, rather than just a helping hand.
“This generation of first time buyer is more diverse in financial circumstances than ever before, but there are also more pathways to home ownership than a decade ago. It may feel daunting and confusing at times so we would recommend seeking advice from a mortgage broker that can give a whole of market view of both high street and specialist lenders so new buyers get the options that suit their individual circumstances.”
