Borrowing from the bank of Mum and Dad is not a new concept, especially over the last few years when sky high prices meant getting onto the property ladder was an impossible dream for most first time buyers – but now, despite prices having dropped, new research has found that a higher proportion of FTB’s are getting help from parents than ever before…
New research from the Council of Mortgage Lenders has revealed that a whopping eight in ten first-time buyers rely on their parents to get onto the UK property ladder.
Despite the lower prices and historically low interest rates, FTB’s are struggling in the wake of the economic downturn thanks to far tighter lending criteria and the size of the deposits now required.
While the average deposit put down by a first-time buyer last May was 11 per cent of the property’s value, a year on they are typically putting down a record 25 per cent.
The average first-time buyer put down just under £32,000 – only marginally less than their average annual salary of £32,840.
Thus, if buyers don’t have family members to help them out with finding a deposit, they will have little hope of getting onto the ladder.
Whilst lending has tightened considerably over the last few year, in a positive step forward, the CML’s research shows that criteria has started to relax again as signs that the property market is on the road to recovery abound.
Since reaching a record 25 per cent in February, the average first-time buyer deposit has remained unchanged.
But, the banks still need to start lending more in order to bring liquidity back into the market.
Trade Union umbrella organization TUC’s General Secretary, Brendan Barber said, “The credit crunch is continuing to depress the housing market, with access to mortgage finance returning at a snail’s pace.
“The Government needs to ensure that the banks increase the amount of mortgage funding available more quickly.
“It is a matter of particular concern that first time buyers are still being asked to find deposits of 25 per cent since this is hitting younger people particularly hard.
“The housing market continues to be very fragile and could be threatened further by rising job losses. Strong action to save jobs and beat the housing crisis must be the Government’s number one priority,” he added.
The CML data shows the number of loans for house purchase edged up by four per cent to 37,400 in May, although this is still 28 per cent lower than a year earlier.
Despite the difficulties they are facing, the number of FTB’s buying their first home rose for the fourth month in a row during May.
A total of 14,000 loans were agreed for first-time buyers, the highest figure since October but less than half the number who managed to get on to the UK property ladder each month before the credit crunch struck.
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