First-time buyers to get £30bn of family help over next three years

People buying their first home had almost £10bn of financial help from family members last year to help them get on the property ladder.

A new analysis from property firm Savills reveals that gifts and loans from the so-called Bank of Mum and Dad totalled £9.4bn in 2023.

The amount has almost doubled since 2019 as prospective buyers faced higher house prices, increased mortgage rates and a reduction in high loan-to-value (LTV) lending.

But although more than half of all first-time buyers have financial assistance from family members, there are other ways of getting on the first rung if you don't have that option.

Lower mortgage rate

Savills found that 164,000 first-time buyers had family assistance in buying their first home in 2023, accounting for 57% of all mortgaged first-time buyers.

"While many homebuyers enjoyed record low interest rates during the early part of the decade, more stringent mortgage requirements, which have been in place since the start of the pandemic, have impacted higher LTV lending, most commonly used by first-time buyers," explained Frances McDonald, director of residential research at Savills.

"In addition to this, record rental growth and increased mortgage rates (particularly for high LTV products) have acted as a further blow to first-time buyers' home-owning aspirations. As a result, a greater proportion have needed support to get onto the housing ladder, and those who were able to, took advantage of family support to try and secure a deal at a lower mortgage rate."

Data from the Bank of England shows that average quoted mortgage rates for 90% and 95% LTV rates were 5.66% and 6.08%, respectively, in July 2024. Although this is down from recent peaks, rates are significantly higher than they were two years ago.

As mortgage rates continue to come down, Savills predicts a decrease in the proportion of first-time buyers that need support from the Bank of Mum and Dad. However, the total contribution towards first-time buyer purchases is forecast to remain in line with 2023 levels -- and over the next three years, almost £30bn is expected to be paid out.

Average of nearly £60,000 from parents

A separate analysis by property website Zoopla shows that nearly two-thirds (63%) of people who purchased their first home in the past five years had financial help from family, rising to over three quarters (76%) of buyers under the age of 30.

Three quarters (74%) received this support from their parents, with the sum gifted or loaned totalling £58,129 on average -- in line with the average UK first-time buyer deposit of £60,100.

One in five (20%) had help from grandparents, 14% from siblings and 10% from aunts and uncles. Amongst those who had help from non-parental family members (28% in total), the support added up to £68,807 on average (which may or may not have been in addition to support from parents).

This support typically enables people to buy their first home much sooner, Zoopla found.

On average, those who had financial support from their parents were able to purchase their home more than six years sooner than those who did not (32.9 years vs 39.2 years). Meanwhile those who received financial help from grandparents (often in the form of an inheritance) were able to purchase their first home aged just 30 on average -- nine years sooner than those who had no help.

The most common things first-time buyers receive parental help for are the deposit (66%), legal fees (24%) and renovation costs (20%). Over a quarter (26%) also receive help with their monthly mortgage payments.

There are various schemes available to help those who do not have access to financial assistance from family, including the mortgage guarantee scheme, the First Homes scheme, Lifetime ISAs and shared ownership. Zoopla found that the majority of those who did not have help (83%) were aware of at least one scheme. For example, 29% were familiar with Lifetime ISAs.

Other options

Getting help from parents and other family members is "very much the default", with the majority of those who bought their first home in the past five years receiving family help, said Daniel Copley, consumer expert at Zoopla.

"This shines a light on how hard it can be to go it alone and buy one without this financial backing," Copley said. "But even if it takes a little longer, there are many ways for people to get on the housing ladder themselves.

"Many of those in the survey are not aware of schemes such as shared ownership or Lifetime ISAs -- as well as many others -- that are designed to help people buy their first home.

"So if you're not able to access parental help, it's worth investigating these to see if there are other options that will help you to own your first home sooner."