Once upon a time, securing a loan – or even a cash gift for the very lucky – from the Bank of Mum & Dad was the only way prospective homeowners could buy that all-important first home. But, this kind of financial reliance is waning, with research revealing that more first-time buyers are stepping onto the ladder with their own two feet.
According to research from Clydesdale and Yorkshire Banks, the number of first-time buyers (FTBs) relying on their parents to fund their house move has dropped significantly. The latest Annual First Time Buyers Survey revealed that less than half (46%) of FTBs surveyed needed help saving for their deposit in 2014, a sharp drop from the 63% who needed help in 2013, and considerably less than the 78% who said the same in 2012.
It's clearly a positive move, highlighting the fact that FTBs have the financial capability to save up for that deposit themselves, arguably helped by the rise in mortgages available to those with a small deposit.
But, it isn't only the youngsters themselves who benefit, as Sylvia Waycot, editor of Moneyfacts.co.uk, commented: "It should be applauded that adult children can once again step onto the property ladder without needing to make a substantial withdrawal from the Bank of Mum & Dad, and not only for the obvious success of the young, but also because it is never more imperative that people look after any nest egg than when they reach middle age or older.
"After this time of life, the opportunities to increase financial strength deteriorate rather than grow. The success of a comfortable retirement without money worries requires hard decisions about the emotional need to help ones family against the loss in income it will cost you in older age. Thankfully, research suggests fewer parents need to make the difficult choice."
So, more FTBs are able to do it for themselves and secure that first property without their parents' help, a win-win situation for everyone concerned. This has been largely helped by the availability of 95% LTV mortgages having increased significantly in recent years – it's more manageable to save up a deposit of 5%, rather than needing one of 10% or even 20%+ – and the Government's Help to Buy scheme could well be the key driver.
Official figures released last week revealed that the Help to Buy scheme has helped 88,420 people buy a new home since its launch in April 2013, and happily, the majority of beneficiaries have been first-time buyers. In fact, 66,661 buyers have bought their first home thanks to the scheme, meaning that around 80% of scheme completions have been FTBs.
This shows that the scheme has successfully targeted those who really needed help to get on the housing ladder, and it could also have encouraged lenders to review their lending practices and offer more loans at higher LTVs – an assumption backed up by the fact that even lenders who aren't participating in the scheme are actively offering mortgages to those with a 5% deposit.
Saving up for that deposit is becoming far more manageable, while growing economic confidence could mean people have even more disposable cash left over to put into a savings account, and the number of high LTV loans is showing no signs of reducing. Ideally, this could mean that the number of first-time buyers will continue to rise, without Mum and Dad having to foot the bill.
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