How the Bank of Mum and Dad skews the property market – Tatch

Yet the route to homeownership has become increasingly difficult. With house prices rising and mortgage affordability tightening, many aspiring buyers rely on financial support from family or inheritance to fund deposits. In 2023-24, 31% of FTBs received help from friends or relatives, while a further 9% used inherited funds, according to the latest English Housing Survey.

This growing number of assisted first-time buyers, who use ‘the Bank of Mum and Dad’, raises important questions about how policy can better support access to the housing market.

Giving a leg-up to FTBs who already have help 

We looked at the impact of the temporary stamp duty holiday, which the government introduced during the pandemic, on properties worth up to £500,000. This was aimed at supporting the market during a period of economic instability, but it appears to have had uneven effects.

By reducing transaction costs, our analysis found a disproportionate increase in the number of assisted-FTBs. The percentage of FTBs who were assisted peaked at 35% during the stamp duty holiday, compared with the long-term average of 27%. 

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We also found that the policy coincided with a notable increase in borrowers withdrawing very sizeable amounts of equity when remortgaging, suggesting that some households were drawing on their own property wealth to support others – particularly parents helping their children onto the ladder.

The percentage of remortgaging where equity is withdrawn for this likely purpose peaked at 49% during the stamp duty holiday, far above the 34% just before it began.

This indicates it disproportionately benefitted those already in a position to buy through their access to the Bank of Mum and Dad.

We must bridge the gap between the haves and the have-nots 

And the disparity exists in normal times as well, where we see notable and consistent differences between those getting help and those buying entirely under their own steam.

Two of the clearest differences are age and income. Nationally, FTBs who receive assistance are able to purchase a home at an average age of just over 30 with an average household income of £56,000, compared with over 32 and £65,000 for those without support. But despite being younger and having a lower household income, the deposit assistance they receive means the assisted buyer, on average, purchases a higher-priced property.

The deposit numbers are most stark in London. A borrower buying without assistance typically put down a deposit of nearly £150,000 in 2024, but the average deposit size for an assisted buyer in the capital was approaching a quarter of a million pounds.

Buying earlier allows people to lock in lower property prices (in a generally appreciating market) and benefit from a longer period to pay their mortgage off. These advantages can compound over time, widening the gap between those with and without help.

Whilst a majority of FTBs still manage to do this under their own steam, the proportion who get help is increasing over time. 

Creating a sustainable housing market means recognising the challenges that different sorts of FTBs face. The government’s aim of building more homes is welcome, as is the regulator looking at whether changes can be made to mortgage affordability rules to help more FTBs.

We need a targeted, balanced approach to housing policy, with demand-side measures implemented alongside meaningful action on the supply side.