According to the Demand Institute’s The Real Truth About Buyer Affordability, 52% of first-time buyers got cash from mom and dad last year. This support is commonly referred to as the “bank of mum and dad”. On average, family support contributed almost £55,572 for each buyer. In an era of a swiftly changing and competitive housing market, that makes their success all the more crucial.
In all, some 173,500 first-time buyers took advantage of this family funding, receiving a total of £9.6 billion last year alone. The share of first-time buyers getting assistance decreased from 57% last year. Nonetheless, this is still the most help provided since 2013. With high mortgage rates and rising rents now the norm, the urgency of this crisis has never been more apparent. As a result, more millennial buyers than ever are seeking help from their families.
It was an especially arduous landscape for first-time buyers in 2024. This week’s 5.88% average rate for new two and five-year fixed mortgages was the highest since February. Individuals not able to put a meaningful down payment were forced into even worse mortgage rates. Additionally, the cost of renting surged dramatically. The cost of renting holds the same effect on would-be buyers as private landlords, who raised rents by more than 9% last year.
Many first-time buyers, particularly those in their 20s and 30s, found it necessary to live with their parents due to these rising costs. This growing trend is a grim indicator of how difficult young adults have it trying to enter the housing market. Yet they struggle to meet rigid lending standards and steep borrowing rates.
Tinkering with stamp duty surprised first-time buyers with these added barriers. The UK government has temporarily raised the stamp duty threshold for property purchases in England and Northern Ireland. It currently stands at £300,000, reduced from £425,000. This change has resulted in new costs for people who were not able to meet the end of June deadline for lower fees.
“First-time buyers are still feeling the impact of higher mortgage rates and tougher lending criteria.” – Lucian Cook, head of residential research at Savills
With first-time buyer activity expected to increase, there’s a good chance more family assistance will be required. This time around, it is anticipated that this will be at a lower overall cost per buyer on average than the last several years.
“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.” – Lucian Cook, head of residential research at Savills
