How is the Bank of Mum and Dad holding up?

News from the Bank of Mum and Dad

Contact A Mortgage NowA recent survey by PrimeLocation has revealed just how much first time home buyers in the UK turn to mum and dad when seeking their first mortgage.

The problem is of course deposit. Zero deposit and low deposit mortgages have disappeared from the market over the past five years.

The need for a bigger deposit makes it difficult for many young people to get on the housing ladder for the first time. With an average price of a first time buyer property in the UK still over £150,000, deposit requirements run into tens of thousands. In London and the South East of course the situation is even more acute.

So how are mums and dads helping their children?

According to the report:

40% of first time home buyers had their mum and dad contribute to their deposit

11% were lucky enough to have parents contribute over £100,000 to their purchase

7% of parents bought a property outright for their offspring

Where parents are not in a position to contribute to deposit, there is still a good proportion allowing the children to live rent free at home to allow them to save for a deposit.

What are parents prepared to do to help with a first purchase?

28% are prepared to sacrifice personal luxuries to help save for a deposit.

16% are prepared to reduce their own standard of living to assist.

20% are prepared to put up some of their pension or savings to help and 13% are ready to take on more mortgage debt themselves.

Over 15% are ready to downsize their own property to assist.

Why are mum and dad so keen to help?

It looks like the sense of security that comes with owning your home is still alive and kicking. The view that property is a good investment still pervades even though there is very little capital growth to be seen in recent years.

How can you help mum and dad to help you?

Our tips for making it easier to get on the property ladder are:

Keep your credit file clean – make sure everything is paid in full and on time. Problems on your credit file mean less choice of Lenders and more deposit needed.

Avoid New Build if you have limited deposit – with just one Lender currently allowing deposits of under 15% on New Build they are best avoided if deposit is short.

Don’t be over ambitious – the higher the purchase price, the higher the required deposit

Get advice – don’t limit yourselves to one Lender offering one set of options

Finally, be nice and keep mum and dad onside – as a bank they will be the most understanding financial backers you will encounter in your lifetime.

Contact A Mortgage Now

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