New First Time Buyer Index research from Aldermore bank1, surveying over 1,000 prospective first time buyers in the UK, shows the great lengths that parents are going to help their children get on the housing ladder, as Covid-19 increases challenges.
With the Covid-19 pandemic bringing greater barriers, with recent research showing the average deposit for a first time buyer in the UK jumped nearly £12,000 in the past twelve months to £59,0002, prospective first time buyers are increasingly turning to their family and friends for assistance. One third (33%) say they are funding their deposit with parental/family assistance, an increase from under a quarter (22%) in March 20203 just before the pandemic hit. In addition, over a quarter (27%) are using their inheritance, a big jump from one in twenty (6%) pre-Covid-19.
| How are first buyers funding their deposit | March 2021 | March 2020 |
| Using my own savings | 66% | 66% |
| Using joint savings with my partner | 45% | 43% |
| With parental/family assistance | 33% | 22% |
| From inheritance | 27% | 6% |
| Borrow from/buying with friends | 24% | 4% |
The methods in which parents provide funding for their children’s deposit is changing, with the traditional means of providing cash savings decreasing from 55% in March 2020 to 35% now, as parents go to more extreme lengths to help their children.
Nearly two in five parents (38%) that are helping their children, are doing so by remortgaging their property, up dramatically from 7% pre-Covid-19. Two in five parents (38%) are also selling significant assets, such as a car or holiday home or releasing equity in their homes to drum up funds, a huge increase from March 2020 where just 9% of parents went to these lengths. Other popular support for first time buyers include downsizing (18%), selling a second/buy to let property (18%), taking money from pensions (17%) or stocks/ shares (16%).
| How are parents assisting their children | March 2021 | March 2020 |
| Remortgaging their property | 38% | 7% |
| Sold an asset, i.e. car, holiday home, etc. | 38% | 9% |
| Released equity in their property | 36% | 9% |
| They had cash savings | 35% | 55% |
| They moved and downsized | 18% | 13% |
| Sold a second property/investment property | 18% | 10% |
| Took a cash lump sum from their pension | 17% | 10% |
| Stocks and shares | 16% | 11% |
| Liquidised investments | 16% | 10% |
| Sold a business | 11% | 8% |
The Bank of Mum and Dad continue to be the main source of support, providing funds for nine in ten (93%) prospective first time buyers receiving assistance, up from 62% in March 2020. However, more members of the family are helping with the Bank of Grandma and Granddad growing from one in nine (13%) pre-Covid-19 to almost half (45%) of prospective first time buyers receiving assistance.
There is also a sudden trend of prospective first time buyers seeking to buy or receive funds from outside the family, turning to friends for support or to buy together. A sixth (15%) are asking to in part fund their deposit this way, compared to just 11% twelve months ago.
| Who in the family is assisting financially | March 2021 | March 2020 |
| Parents (combined) | 93% | 62% |
| Father | 81% | 66% |
| Mother | 77% | 57% |
| Grandparents (combined) | 45% | 13% |
| Grandmother | 38% | 15% |
| Grandfather | 24% | 10% |
| Friend | 15% | 11% |
| Uncle and/or Aunt | 13% | 12% |
| Siblings | 10% | 21% |
Jon Cooper, head of mortgage distribution, Aldermore said:
“Young people have had a stark fall in home ownership the past two decades, as the challenging environment of high house prices, shortage of suitable homes, and weak wage growth have hindered home buying chances. The Covid-19 pandemic has only increased the difficulties faced by new buyers meaning the Bank of Mum and Dad providing support has increasingly become a necessity, rather than just a helping hand.
“This generation of first time buyer is more diverse in financial circumstances than ever before, but there are also more pathways to home ownership than a decade ago. It may feel daunting and confusing at times so we would recommend seeking advice from a mortgage broker that can give a whole of market view of both high street and specialist lenders so new buyers get the options that suit their individual circumstances.”
**Ends**
1 Research conducted, on behalf of Aldermore bank, by Opinium in March 2021, with a nationally representative sample size of 1,008 prospective first time buyers
2 Research from Halifax bank. Source
3 Research conducted, on behalf of Aldermore bank, by Opinium in March 2020, with a national representative sample of 2,003 prospective first time buyers
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