Because there will no longer be a Help to Purchase programme, parental aid is expected to become more prevalent.
As it gets increasingly more difficult to jump on the ladder of property, the Mum and Dad Bank is expected to experience the busiest year it has seen in more than a decade.
The proportion of first-time buyers who will receive assistance from their parents to purchase a property is likely to reach its highest level since 2011 this year, according to predictions made by industry experts.
According to Savills estate brokers, rising mortgage rates and the conclusion of the Help to Buy programme will result in an increase in the number of first-time buyers who turn to their parents for assistance in climbing the housing ladder.
In 2022, around 46 percent of all first-time buyers who had mortgages had support from family members in obtaining their mortgage. There were 170,000 first-time buyers who had aid from family members in obtaining their mortgage in 2022.
Although it was down from the all-time high in 2021 of 198,000, the company noted that it was still greater compared to that of any other year since statistics began being kept in 2006.
In the wake of rising mortgage rates, parents spent a total of £8.8 billion on their children’s healthcare in the previous year. This is an increase of about £4 billion since the beginning of the pandemic.
According to the projections made by Savills, their contributions are forecast to reach £26 billion over the course of the next three years.
As the Help to purchase programme, which was initiated in 2013, draws to a close, it is anticipated that the percentage of first-time buyers who rely on their parents would also increase.
In October, the government programme known as “Help to Buy” stopped accepting new applications. This programme enabled first-time buyers to purchase a home with as little as a 5% down payment.
As part of the programme, the government offered a loan up to 20 percent of the total purchase price, or 40 percent in the city of London, with no interest for a period of five years.
To the tune of around 335,000 new homebuyers have utilised the Help to Buy programme since its inception, and they have received a total of £2.2 billion in aid since 2022 alone.
Real estate professionals and developers are lobbying for a revamped version of the programme to be included in the upcoming Budget, but its detractors argue that rising home prices have made homeownership unaffordable for many.
According to Frances McDonald, head of research at Savills, the recent increase in the cost of housing has resulted in a “double whammy” for first buyers. According to the data provided by the lender Nationwide, even if housing prices have been on a downward trend for the past half year, they are still 19 percent higher than when the epidemic first began.
Ms McDonald said that the rising cost of living due to both inflation and rents makes it difficult for many people to save enough to meet their basic needs, even with the big interest rates they are now confronting.
Even if first-time buyers can manage the highest possible monthly payments, according to Ms. McDonald, it will be difficult for them to obtain a mortgage if they only have a 5% down.
According to her, mortgage lenders are expected to continue favouring mortgage lending that is less risky and has a lower loan-to-value ratio, which makes it more difficult for first-time purchasers.
According to an analyst, Moneyfacts, the typical interest rate for a fixed-term mortgage with a two-year term that requires a deposit of five percent has increased from 3.11 percent to 5.85 percent in the past year.