Rising house prices affecting reliance on Bank of Mum and Dad

Increasing house prices may mean that the Bank of Mum and Dad can no longer bridge the affordability gap for first-time buyers, according to new research from Trussle.

The online mortgage broker found that 40% of first-time buyers now need family support to purchase their first home.

In 2019, there were an estimated 356,000 first time buyers, suggesting that 142,400 used financial gifts to purchase a home in the last year, Trussle said.

The broker’s research, based on responses from 2,000 UK first-time buyers, found that 14% of first-time buyers are checking in at the “Hotel of Mum and Dad” in order to save. Trussle is predicting this trend could increase “significantly” in the coming years if market factors continue to make properties unaffordable for first-time buyers.

“First-time buyers are bearing the brunt of rising house prices and economic uncertainty,” said Trussle head of mortgages, Miles Robinson.

“In recent years, many of these buyers have needed a ‘leg up’ onto the property ladder. If increasing property prices and tightening household finances mean the Bank of Mum and Dad can no longer bridge the gap, then this could have big ramifications for the property market.”

Trussle’s research highlighted data from the Office for National Statistics for August showing that the average house price has increased by £65,583 in the last decade. The broker said that demand generated by the government’s stamp duty holiday has also helped push house prices to new heights this year, rising 5.8% in October alone.

However, the research also highlighted that lenders are tightening restrictions, with 92% of all 90% LTV products pulled from the mortgage market since March this year. Trussle suggested a lack of higher LTV mortgage products “isolates” would-be homeowners, who now need to save larger deposits, often 15% of the property price or higher, as many 90% LTV mortgages have disappeared.

Furthermore, with research showing that the average first time buyer deposit sits at 20%, Trussle said that rising house prices might potentially “max out” what parents can afford to help with.

“The property market is essentially an ecosystem and so it’s crucial to have first-time buyer activity if the market is to stay healthy,” Robinson added. “We must ensure the market is accessible to first-time buyers, and lenders can play their part by reintroducing higher LTV mortgages.

“This would not only help first-time buyers to embark on their home ownership journeys, but also make sure the market is in a position to confront the challenging economic climate ahead of us.”

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