Recent analysis from Savills shows that gifts and loans from the Bank of Mum & Dad (BoMaD) will total £25 billion over the next three years – supporting almost half of first-time buyer transactions. It is predicted that in the three years to 2024, nearly 470,000 first time buyers will get financial help from a parent or member of their family.
Soaring house prices have made saving up for a deposit seem impossible for many, with contributions from the BoMaD towards purchasing a home amounting to a total of £10.7 billion in 2021 – more than double (115%) the amount in 2019. David Hannah, Group Chairman of Cornerstone Tax, suggests that it should not be a social stigma to borrow money from the BoMaD and rising costs have made it a necessity.
Properties in the UK are now more unaffordable than ever, with recent figures released by the Office for National Statistics showing that the average home sold in England cost the equivalent of 8.7 times the average annual disposable income – the worst affordability ratio in England since records began in 1999. There are signs of an increase in supply however, with the number of sellers in the property market increasing by 13% compared to this time last year according to Rightmove, although the number of available homes for sale remains 40% lower than in 2019.
However, it is not only the first-time buyers who are struggling, with a recent survey from Brewin Dolphin showing that 41% of parents are already not setting aside money for their children’s future expenses due to rising inflation and costs. Adding to this a report from insurer Canada Life found that 48% of those who support family members will now struggle to do so financially for the next 12 months. As costs continue to rise, the BoMaD is becoming increasingly important but parents are facing a myriad of obstacles to save enough for their children.
David Hannah, Group Chairman at Cornerstone Tax discusses:
“With first-time buyers facing the worst housing affordability ratio on record, it has become incredibly difficult for people to come up with a deposit. It can years to hit your saving target, and by which time house prices may have risen considerably meaning this amount is no longer enough.
“I think something has to change around the perception of the BoMaD – it should not be a social stigma to borrow from your parents, if you want to get your feet on the property ladder then it has almost become a necessity.
“Recent research also shows that the current economic climate is making it difficult for parents to save enough for their children to benefit from, and whilst they’ll want to help with getting them on the property ladder, it is extremely difficult financially at the moment.”
