Bank of mum and dad ‘helps half of first-time buyers’

9 hours agoKevin PeacheyCost of living correspondent

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More than half of first-time buyers received financial help from their family to make house purchases last year, according to estimates by estate agency Savills.

An average of £55,572 was given in loans and gifts by the so-called bank of mum and dad to buyers, it said.

Young buyers faced relatively high mortgage rates in 2024, while also seeing the cost of renting increase.

More recently, changes to stamp duty led to a rush of new buyers before the end of March, but greater costs for anyone who missed that deadline.

More help, better deal

The annual report by Savills suggests that 52% of first-time buyers received assistance from the bank of mum and dad last year, which could also include other donors from the family.

This was a slightly lower proportion than the 57% of the previous year, but higher than every other year since 2013.

Family assistance peaked in 2009 during the fallout from the financial crisis, when 70% of first-time buyers received help, the estate agency’s figures suggest.

It estimated 173,500 first-time buyers received assistance last year, receiving a total of £9.6bn.

The findings are based on first-time buyer and average loan-to-value data, as well as how this relates to responses from various surveys about family support.

The average rate for all new two and five-year fixed mortgages last year was between 5% and 6%, figures from financial information service Moneyfacts show.

That rate would be higher for many first-time buyers unable to offer a large deposit, and much higher than a few years earlier.

Buyers facing that scenario “took advantage of greater family support to try and secure a deal at a lower mortgage rate”, according to Lucian Cook, head of residential research at Savills.

“First-time buyers are still feeling the impact of higher mortgage rates and tougher lending criteria,” he said.

Many potential first-time buyers have also faced financial strain from the rising cost of living, and particularly from the greater expense of renting, although the latter may have encouraged more to get on to the ladder more quickly.

The annual increase in rent paid to private landlords breached 9% last year, forcing many to live with their parents in their 20s and 30s.

Financial assistance varies across the country, as do house prices and average incomes.

And stamp duty, which was primarily levied on buyers in the south of England, changed in April.

First-time buyers of homes bought for more than £300,000 in England and Northern Ireland must now pay stamp duty, compared with the previous threshold of £425,000.

Data suggests that led to a surge in first-time buyer purchases ahead of the deadline.

Analysis by the Yorkshire Building Society suggests the first three months of this year saw the highest number of first-time buyer applications since the 2022 post-Covid peak.

Mr Cook, from Savills, added that the likelihood of regulators allowing lenders to loosen some of their lending criteria could also benefit first-time buyers and their families.

“[This means] lowering the barrier for entry and allowing first-time buyers to qualify for larger mortgages,” he said.

“So, although more first-time buyer activity may mean more bank of mum and dad assistance, this is likely to be at a lower average cost per first-time buyer.”