Bank of Mum and Dad gifts to total £25bn in next three years

Gifts from the Bank of Mum and Dad (BOMAD) will total £25bn over the next three years, new analysis from Savills has suggested.

BOMAD loans between 2022 and 2024 will support almost half of all first-time buyer transactions, the property group stated.

In the three years to 2024, Savills has estimated that 470,000 first-time buyers will get financial help from a parent or other family member, as rising house prices put the pressure on those saving for a deposit.

According to the latest Nationwide House Price Index, the average price of a UK home has climbed by 11.0% in the year to July. Prices have now risen for 12 consecutive months, most recently by 0.1% in July, which has kept annual price growth in double digits for the ninth month running, leaving many first-time buyers struggling to ensure their savings keep pace.  

Savills stated that lending peaked in 2021 when 198,000 first time buyers had family assistance in getting their mortgage, a figure equating to around 49% of all mortgaged first-time buyers, up from 131,000 in 2020 and 136,000 in 2019. The BOMAD contributed a total of £10.7bn towards the purchase of these homes – more than double 2019 (115% higher) – as a result of mortgage market conditions since the start of the pandemic which particularly affected higher LTV lending.

“Help from the BOMAD peaked last year as lenders exercised rate increases across high LTV loans,” said research analyst at Savills, Frances McDonald. “This meant more buyers looking to take their first step onto the housing ladder needed to take advantage of any family support to try and secure a deal at a lower rate. However, as ratios normalise over the course of this year, we can expect family assistance to fall back to levels seen prior to 2021 – at around £8.4bn.

“We are also anticipating that first-time buyer transactions will fall back in 2022, in line with overall transactions, and so the proportion who are receiving help from family (43%) will remain above pre-pandemic levels – of 39% in 2019 and 41% in 2018.”

Savills also highlighted the Help to Buy scheme, which supported 40,000 loans to first-time buyers, providing £2.9bn of financial assistance, bringing the total support received by first time buyers to more than £13.6bn in 2021.

However, this will end in March 2023, removing support which tens of thousands of aspiring homeowners are currently relying on. 

McDonald added: “Those who have the option to turn to family members for help and are in secure employment will find it much easier to get onto the housing ladder. This means that the market will be increasingly confined to the highest earners and those who have received significant support.

“Despite higher interest rates, the main barrier to home ownership is still buyers’ ability to save for a deposit. This is particularly true with the rising cost of living and so the role of the BOMAD will remain a key avenue of support to those able to access it. This will be all the more vital from March 2023 when Help to Buy closes, with more first-time buyers looking to plug a hole in their deposit gap.”

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