80% need the Bank of Mum and Dad

The proportion of first-time buyers in need of financial assistance from their parents or other family members has ballooned in the last three years.

Latest data from the Council of Mortgage Lenders (CML) reveals that 80% of first-time purchasers under the age of 30 get help from their relatives, a substantial increase on the 45% in need of parental help before the credit crunch hit in 2007.

People aged 25 to 34 are now half as likely to buy property as they were a decade ago.

The CML observes that typical first-time buyer characteristics have altered drastically in a very short period of time.

It says: “What is most striking is that to get into the market, today’s first-time buyer is putting in a deposit of around £34,000, equivalent to more than their total gross annual household income.

“Only three years ago the deposit required to enter the market was a much more manageable – but still hefty – 37% of annual household income, at £12,700.”

The trade body does not see the situation improving for first-time buyers any time soon, and believes that the proportion of owner occupiers in the UK will keep falling.

It adds: “There are very real questions about how to deliver a significant enough flow of housing in general, of whatever tenure, to meet the needs of the growing population.”

The CML points to limited funding alternatives in the private sector as a key element in constraining the housing market. The securitisation market, where mortgage lenders used to raise a lot of the money they then lent out to borrowers, has been pretty well closed since 2007.

It believs that the resulting lack of mortgage funding, combined with the public sector spending cuts expected after the election, will result in a shortage of both housing finance and housing itself.

Between 1999 and 2009, there were between 130,000 and 170,000 new homes constructed per year.

But it is now thought that between 238,000 and 290,000 new homes must be built each year to meet housing needs.

The CML says: “The lending industry has a continuing significant role to play, as it always has had, in fostering the creativity and innovation that can devise new solutions to old problems. And there are many examples of this, as lenders continue to lend across the spectrum – to developers, to housing associations, to homeowners and to private landlords.

“But there is also a significant role for government, through both the planning system and other means, to help support conditions that will help the market eventually climb out of the housing shortfall that currently exists.”