A record number of first-time buyers are now relying on financial help from family members in order to get a foot on the property ladder, according to new research from the Social Mobility Commission. The ‘bank of mum and dad’ is often the lender of choice for many would-be home owners.
According to the research, over a third of first-time buyers in England (34%) now turn to family for a financial gift or loan to help them buy their home, compared to one in five (20%) seven years ago. A further one in ten rely on inherited wealth.
It is not only first-time buyers who benefit from parental support - over one in ten (12%) of existing owners are also benefitting from a gift or a loan when buying a new home.
Impact on Social Mobility
With housing tenure remaining one of the main ways in which wealth is held and transferred through generations, the report warns that this trend will have damaging consequences for social mobility, as young people on lower incomes are finding it almost impossible to get a foot on the housing ladder.
In the UK, around a third (30%) of households with dependent children currently hold assets that could be used towards a deposit for the purchase of a home. However, in respect of social mobility, the report notes that around only 10% of households without any formal educational qualifications feel able to assist their children with homeownership costs.
“Home ownership helps unlock high levels of social mobility but it is in free-fall among young families,” explained the Rt Hon Alan Milburn, chair of the Social Mobility Commission. “Owning a home is becoming a distant dream for millions of young people on low incomes who do not have the luxury of relying on the bank of mum and dad to give them a foot up on the housing ladder.”
“The way the housing market is operating is exacerbating inequality and impeding social mobility,” he added. “It is welcome that the government recognises the growing problem people face in getting on the housing ladder. A major national effort is needed to expand opportunities for home ownership and will require more radical action on housing supply.”
The Commission has recently called on the Government to:
- commit to a target of three million homes being built over the next decade, with one-third - or a million homes - being commissioned by the public sector,
- expand the sale of public sector land for new homes and allow targeted house building on green belt land, and
- modify its starter home initiative to focus on households with average incomes and ensure these homes when sold are available at the same discount to other low-income households.
The Social Mobility Commission isn’t the only body to highlight the difficulties facing first-time buyers.
Recent research from Which? Mortgage Advisers found that first-time buyers are saving for up to a decade for a deposit for a home, with more than two thirds saving for over two years.
It also found evidence of financial help being provided by family members. Three in ten (29%) were supported by contributions from their parents, and a further 8% were given financial help by other family members.
For expert advice on buying or selling property in Scotland, then contact our specialist property lawyers today.