Bank of mum and dad – Tony Freeman looks into whether this is the only way to buy a house4th April 2017
According to a new report by the Social Mobility Commission, a record high number of first-time buyers are using the ‘Bank of Mum and Dad’ to fund their purchase,
The government advisory group found just over a third these buyers, 34 per cent, are using loans or gifts from family members.
This figure has risen substantially from 20 per cent since seven years ago, illustrating the pressure on first-time buyers and their reliance on support from parents and family members to getting a foot on the property ladder.
One in ten rely on inherited wealth, the analysis of government and housing market data by Cambridge University and Anglia Ruskin University researchers found. The report says: ‘Until recently, the proportion of first-time buyers in England receiving money or loans from parents had fluctuated from 20 to 30 per cent. However, the current figure is 34.1 per cent, an historic high.’
The commission has warned that the trend will have ‘damaging consequences’ for social mobility because those from low-income backgrounds will find it ‘almost impossible’ to become homeowners – one of the main ways wealth is held and transferred through generations.
Chair of the Social Mobility Commission, The Rt Hon Alan Milburn, said: “The way the housing market is operating is exacerbating inequality and impeding social mobility.”
He added: “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 researchers forecast that the number of first-time buyers is to climb slightly in the short term, and then gradually fall in the next 25 years.
The report also found that first-time buyers who receive money from their parents can become homeowners 2.6 years earlier than those who self-fund their purchase; in London, this rises to 4.6 years.
One in ten existing buyers also use loans and gifts from family members to buy a new home, and another 9.6pc used inheritance to fund a purchase.
Some parents will be able to help financially, cashing in savings and investments, but others may have to borrow against their house.
However, it means that for those parents on low incomes home ownership for their children may be a long way off as they struggle to provide this support, something that the government must tackle sooner, rather than later.
11th September 2017Read more