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First-time Buyers

Bank of Mum and Dad to lend £25bn over next three years

Christina Hoghton
Written By:
Christina Hoghton
Posted:
Updated:
04/08/2022

Parental wealth is expected to support around 47 per cent of all first-time buyers

Loans from the Bank of Mum and Dad will total £25bn over the next three years, supporting almost 470,000 first-time buyers.

According to analysis from property group Savills, this is equivalent to around 47 per cent of all first-time buyers.

Savills said that this rise is a result of rapidly increasing house prices. According to the latest Nationwide figures, house prices rose 11 per cent on the year in July.

The property firm also pointed to the end of the Help to Buy scheme in March 2023 as a factor for increased loans from the Bank of Mum and Dad, as it will remove vital support that tens of thousands of aspiring homeowners rely on.

Help to Buy supported 40,000 loans to first-time buyers according to Savills, providing £2.9bn of financial assistance, which brings the total amount of support given to first-time buyers in 2021 to more £13.6bn.

Savills said that Bank of Mum and Dad lending is expected to have peaked in 2021 when 198,000 first-time buyers had family assistance in getting their mortgage, which is around 49 per cent of all mortgaged first-time buyers. This is up from 131,000 in 2020 and 136,000 in 2019.

In 2021, the Bank of Mum and Dad contributed a total of £10.7bn towards the purchase of first-time buyer homes, more than double the figure for 2019 of £5bn.

Savills said that this was due to more stringent mortgage market since the start of the pandemic.

Frances McDonald, research analyst at Savills, said: “Help from the Bank of Mum and Dad peaked last year as lenders exercised rate increases across high loan to value (LTV) loans. This meant more buyers looking to take their first step onto the housing ladder needed to take advantage of any family support to try amend secure a deal at a lower rate.”

She said she expected first-time buyer transactions to fall back in 2022 in line with overall transactions, so the proportion of those using family assistance would go back to pre-pandemic levels.

McDonald added: “Despite strong levels of activity and price growth across the board, lenders are continuing to favour less risky, lower LTV mortgage lending which means it remains difficult for first-time buyers to get on the ladder.

“Those who have the option to turn to family for help and are in secure employment will find it much easier to get onto the housing ladder. This means that the market will be increasingly confined to the highest earners and those who have received significant support.”

McDonald also said the main barrier to becoming a homeowner is having the ability to save up for a deposit. This means the Bank of Mum and Dad will remain incredibly important to those wanting to get on the property ladder, especially as Help to Buy closes.