Getting onto the housing ladder is becoming increasingly difficult for many would-be buyers, which means seeking alternative means to fund that all-important first purchase is often necessary. While many buyers have turned to the Bank of Mum and Dad in years gone by, it seems that there's a new financial institution in town: the Bank of Gran and Grandad.
According to new research from Santander Mortgages, 8% of first-time buyers (FTBs) now rely on the Bank of Grand and Grandad for help towards a deposit, a four-fold increase from five years ago, when just 2% turned to their grandparents for financial support. This coincides with a large shift of turning to family in general – of those currently looking to buy, 32% said they'll use a family loan to help with the deposit, up from the 13% of current homeowners who received financial help from their families.
Given how much first-time buyers need to save these days, it's little wonder so many need help. After all, current FTBs estimate that their deposit will be 32% of their salary (on average), while 19% expect to spend more than half of their annual income on a deposit. In comparison, those already on the property ladder said their deposit was just 20% of their annual income, with only 5% spending more than half their salary.
However, even with support from their families, typical FTBs saving for a deposit expect to be doing so for around five years, a year longer than those who bought their first home five years ago (who only had to save for four years). This could be because 40% of today's FTBs say that the cost of everyday living expenses eats into the amount of money that could be saved, compared with 18% of those who bought five years ago.
Indeed, additional research from Direct Blinds reveals that 33% of those surveyed can't even afford to pay rent, resulting in many continuing to live with their parents into their twenties and beyond.
Others choose to remain at home because they're saving for a house deposit (43%) or they want more disposable income (38%), and they could certainly save a huge amount in the process: 20% don't have a rental agreement and simply contribute when they can, while 15% pay no rent to their parents at all. Not only that, but 26% of parents admit to paying for their adult child's food, and 24% admit to funding their holidays and entertainment subscriptions – taking the Bank of Mum and Dad to a whole new level – so those adult children could really be onto a winner.
However, the fact that so many simply can't afford to move out highlights the unaffordability of the nation's housing market, and explains why so many are turning to alternative sources of funding. David Roebuck, managing director at Direct Blinds, said the fact that over a third of people can't afford to move out and rent independently was "shocking," and "highlights the difficulty of getting on the property ladder for young people".
Despite the difficulties in saving for a deposit, it's encouraging to find that FTBs remain optimistic about the property market, with Santander estimating that 10 million UK adults are planning to buy their first home in the next five years. Not only that, but 45% of those looking to buy are more positive than they were a year ago, with only 20% being less so.
Happily, the uncertain economy hasn't put a dampener on things either, with 44% saying that while they're concerned, they'll go ahead with their purchase anyway, while 39% said that economic factors won't impact their decision at all.
"Despite having to use alternative income streams over and above their salary – such as relying on the Bank of Gran and Grandad - today's first time buyers are demonstrating resilience and determination to achieve their home ownership goals," said Miguel Sard, managing director of Mortgages at Santander UK.
"The purchase of a first property still remains high on the priority list for many people across the UK, and it's encouraging to see so many first-time buyers feeling positive about the year ahead."
Whether you'll be turning to the Bank of Gran and Grandad or anyone else to help fund your house purchase, you'll need to find the right savings account to boost your pot. You may want to consider a Help to Buy ISA, which will give you a Government bonus of 25% on all eligible savings, and could help you take that first step even faster.
Then it all comes down to finding the right mortgage – with the right deal, you can keep your repayments as low as possible to boost your budget for years to come. Check out the top first-time buyer mortgage deals to get started, and see if it's time to take that first step.
Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.