• Research finds 40% of first time buyers need financial help from family to buy their first home¹

• 14% of first time buyers already living with mum and dad to save for deposit²

• The Bank of Mum & Dad could become the Hotel of Mum & Dad if parents’ ability to provide financial support can’t keep up with house prices

• Trussle has mapped out the regions where first time buyers will spend the most amount of time at home saving for a deposit here

New research by online mortgage broker Trussle has revealed the impact rising house prices and increasing lender scrutiny is having on first time buyers. Prospective homeowners are becoming increasingly reliant on financial support from their loved ones in order to get onto the property ladder. 

Starkly, the research from over 2,000 UK first time buyers found that 40% now need family support to purchase their first home.³ In 2019, there were an estimated 356,000 first time buyers⁴, suggesting that some 142,400 used financial gifts to purchase a home in the last year. 

This is primarily due to a long trend of rising property prices, with ONS data from August 2020 showing that the average house price has increased by £65,583 in the last decade⁵. Demand generated by the government’s stamp duty holiday also helped push house prices to new heights this year, rising  5.8% during October alone⁶. Last year, Trussle found that just one in four young adults (aged between 25 and 34 years old) will own a home, compared to two in three people 20 years ago, as house prices are rising nearly seven times faster than people’s income.⁷

Trussle’s research also highlighted just how despondent first time buyers feel about the property market. An overwhelming 69% said that they felt priced out of the housing market and could not afford to live in their desired location⁸. Moreover, 76% admitted to feeling worried, confused, or angry by the mortgage market⁹. This substantiates recent reports that show first time buyers are feeling isolated by the market due to a shrinking range of high loan-to-value products and increased scrutiny of their mortgage applications. 

Trussle’s research follows evidence that lenders are tightening restrictions to counteract the economic uncertainty caused by the coronavirus. Alongside stricter criteria, the number of high loan-to-value (LTV) mortgage products has significantly decreased, with 92% of all 90% LTV deals pulled from the market since March this year¹⁰. A lack of higher LTV mortgage products isolates would-be homeowners, who now need to save larger deposits, often 15% of the property price or higher, as many 90% LTV mortgages have disappeared.¹¹

With research showing that the average first time buyer deposit sits at 20%¹², these factors may also be forcing first time buyers back into the family home to save. Trussle found that over 51,000 first time buyers (14%) have already made such a move¹³. As such, the ‘Bank of Mum & Dad’ could quickly become the ‘Hotel of Mum & Dad’. This trend could increase further if lenders block gifted deposits, the first case of which was reported this summer¹⁴.

The current average first time buyer age is 34 years old, six years older than the average age in 2007. But, this could increase significantly over the next decade if more first time buyers need to make use of the Hotel of Mum & Dad to save for a deposit.¹⁵

Using ONS data on income¹⁶, and estimating that buyers could save at least one fifth of their salary, Trussle also determined how long first time buyers across the country might need to ‘check-in’ to the Hotel of Mum & Dad in order to save for a housing deposit. This revealed huge regional disparities, with buyers from Nottingham set to be the Hotel’s longest residents as they would take 12 years to save a 20% housing deposit (the average deposit for a first time buyer). In contrast, buyers in Edinburgh would only need to stay at home seven years to save for a deposit.¹⁷

Miles Robinson, Head of Mortgages at Trussle comments: “First time buyers are bearing the brunt of rising house prices and economic uncertainty. In recent years, many of these buyers have needed a ‘leg up’ onto the property ladder. If increasing property prices and tightening household finances mean the Bank of Mum and Dad can no longer bridge the gap, then this could have big ramifications for the property market.

The property market is essentially an ecosystem and so it’s crucial to have first-time buyer activity if the market is to stay healthy. The most straight-forward way of achieving this is if lenders reintroduced higher LTV mortgages, enabling first time buyers to apply for a mortgage with a smaller deposit. This could also ensure that  the market is in as best shape possible to confront the challenging economic climate ahead of us.”

~Ends~

Contact

For further information, please contact:

Emily Coyle at [email protected] or Leilah Mackie at [email protected] 

We’ve taken extra care to ensure the information provided within this release is presented in a way that’s compliant with regulatory requirements. If you have any questions about how to repurpose this information or require any further assistance, please contact Leilah Mackie at Trussle.

About Trussle

Trussle helps people love their journey of owning a home. We’re the online mortgage broker helping you wherever you are on the ladder.

See how much you could borrow or save in minutes. Whether you're looking at homes for the first time, or you're looking to remortgage for the fourth time. Our quick online calculators will help you take the next step on your home ownership journey.

Say goodbye to paperwork, long phone calls, and being left out of the loop. Say hello to a quick, jargon-free, personal service that you can access from anywhere at any time. We’ll help you find and secure your mortgage entirely online.

Relax while we ensure you're always on the right deal. We compare your mortgage with the latest deals on the market every day, and we’ll alert you the moment it's time to switch to a more suitable deal. That way, you'll never pay more than you should to own your home.

In September 2016 Trussle launched an industry-first partnership with online property portal Zoopla, making it possible to find and buy a home in one seamless experience. Trussle is backed by some of Europe's leading technology investors including Orange Growth Capital, LocalGlobe, Ed Wray (founder of Betfair), Ian Hogarth (founder of Songkick), Seedcamp, and Zoopla Property Group.

Trussle is a trading style of Trussle Lab Ltd, which is an appointed representative of Mortgage Advice Bureau Limited and Mortgage Advice Bureau (Derby) Limited which are authorised and regulated by the Financial Conduct Authority.

Your home may be repossessed if you do not keep up repayments on your mortgage.

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