First Time Buyers increasingly rely on Bank of Mum and Dad

Gifts and loans from the Bank of Mum & Dad totalled £9.4 billion in 2023, according to the latest analysis from lettings agency Savills.

This amount has almost doubled since 2019, as a result of a more stringent mortgage market, and higher mortgage rates.

In total, 164,000 first-time buyers had family assistance in buying their first home in 2023, accounting for 57% of all mortgaged first-time buyers. While the number of assisted buyers is down from a peak of 198,000 in 2021, this is the highest proportion of first-time buyers receiving help since 2012, and is 10% up on 2022.

“While many homebuyers enjoyed record low interest rates during the early part of the decade, more stringent mortgage requirements, which have been in place since the start of the pandemic, have impacted higher LTV lending, most commonly used by first-time buyers” comments Frances McDonald, director of residential research at Savills.

“In addition to this, record rental growth and increased mortgage rates (particularly for high LTV products) have acted as a further blow to first-time buyers' home-owning aspirations. As a result, a greater proportion have needed support to get onto the housing ladder, and those who were able to, took advantage of family support to try and secure a deal at a lower mortgage rate.”

Average quoted mortgage rates for 90% and 95% LTV rates were 5.66% and 6.08% in July 2024, respectively, according to the Bank of England. Although these rates have come down from their respective peaks, they have increased significantly in the last two years.

As mortgage rates continue to decrease, Savills has forecast that a smaller proportion of first-time buyers are likely to need support from the Bank of Mum and Dad.

While the actual number of those supported is expected to remain on par with 2023, the proportion of first-time buyer purchases receiving support will decrease from 57% in 2023 to 54% in 2024.

The total contribution towards first-time buyer purchases will remain in line with 2023 levels (£9.3 billion). A total of almost £30 billion is expected to be paid out over the next three years.

“Despite the Bank of England’s recent decision to cut the base rate, we expect that lenders will continue to favour less risky, lower LTV mortgage lending. This means that buyers will still have a hard time getting their first foot on the housing ladder” continues McDonald.

“Those who have the option of family support and are secure in their employment will find it much easier to get onto the housing ladder and only the highest earners and those who have received significant support are likely to be able to buy at the top end of the market.”

Numbers of first-time buyers receiving family assistance and amount of assistance given to get on the housing ladder