First time buyers face significant hurdles buying a home; high house prices, alongside the rising cost of living and rent can make saving a big enough deposit feel impossible. So, it is no surprise so many first time buyers turn to family members for help. James Richards, Partner of Maddisons Residential, looks at the reasons why this group of the UK population is struggling to get their foot on the ladder compared to 30 years ago.

A decline in UK young adult homeownership

The government’s English Housing Survey for 2021-22 reported that just 41% of today’s young adults own their own home, compared to 66% three decades ago – leading to a sharp increase in the private rented sector.

More recently, rising mortgages mean that renting privately is now often cheaper than monthly mortgage payments and the additional removal of the Right to Buy and Help to Buy schemes has led to a sorry reality; the younger generation is increasingly trapped in the private rental sector for longer, unable to afford to step on the first rung of the property ladder.

Wider family relatives are helping young first time buyers

So, enter “The Bank of Family”, formerly known as “The Bank of Mum and Dad”, but widening to encompass other relatives who might be able to help by releasing equity or funds. 380,000 property purchases have been helped via this route this year but their funding  doesn’t just stop at deposits, with 36% of parents helping with rent or mortgage payments, too.

Siblings contribution surpasses that of grandparents

New analysis reveals that other family members beyond parents are increasingly lending their financial support to first-time buyers. So far this year, siblings made up a record 11 per cent of family members contributing to first-time buyer deposits, more than double the share recorded five years ago and surpassing grandparents’ contribution, eight per cent, for the first time. They gave an average of £10,250 to their sibling so far this year which comes against a backdrop of high inflation and rising rents limiting a first-time buyer’s ability to save for a deposit.

What if the Bank of Family can't help out?

This may be upsetting, but don’t worry, the government has a number of initiatives designed to help first-time buyers get onto the property ladder. They include:

  • Help to Buy: Equity Loan: offers aspiring homeowners the chance to buy a new-build home with just a 5% deposit
  • Shared Ownership: allows buyers to purchase a share of a property and pay rent on the remaining share
  • First Homes: helps local first-time buyers and key workers by offering new-build homes at a 30% - 50% discount
  • Lifetime ISA: allows first-time buyers to save up to £4,000 a year, with the government adding a 25% bonus
  • 95% mortgage guarantee scheme: the government ‘guarantees’ mortgages for buyers with 5%

On the surface, the outlook may appear disheartening, but it’s important to sift through the headlines to get the complete picture. While most experts believe the unprecedented low interest rates that prevailed following the bank crisis of 2008 are gone forever, wage growth has caught up with inflation for the first time in two years. If you’re a would-be first-time buyer, it’s worth keeping across the ongoing adjustments within the economy as we move towards the predicted new normal.