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Covid-19 makes Bank of Mum and Dad a ‘necessity’ for first-time buyers – Aldermore

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  • 28/04/2021
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Covid-19 makes Bank of Mum and Dad a ‘necessity’ for first-time buyers – Aldermore
The proportion of first-time buyers turning to family for help raising a deposit rose from 22 to 33 per cent year-on-year in March, Aldermore research suggests.

 

The bank said its survey of 1,000 people indicated financial difficulties faced during the pandemic and rising house prices meant external support had become a “necessity” in the past year. 

Those using their inheritance to buy a home increased from six per cent in March 2020 to 27 per cent last month. 

There was also a jump in first-time buyers seeking assistance from friends. Last year, four per cent of new prospective homeowners relied on their friends for a deposit but in March this year, that proportion increased to 24 per cent. 

Two-thirds of first-time buyers relied on their own savings for a deposit, no change from last year. Buyers using joint savings with a partner also stayed largely flat at 45 per cent — a slight uptick from 43 per cent last year.  

 

Cash raising methods 

The different ways in which parents are choosing to raise money to help their children has changed too, the survey found.

Some 38 per cent remortgaged to raise capital compared to seven per cent last year, while the proportion of parents who sold an asset rose from nine to 38 per cent.  

Some 36 per cent used the equity in their homes, up from nine per cent last year. 

As the pandemic has had an impact on most people’s finances, the survey found fewer parents were using their savings to help as just 35 per cent did so compared to 55 per cent last year. 

Some 18 per cent moved or downsized, a similar proportion to those who sold a second or investment property to help their children put down a deposit. 

The proportion of parents who took a cash lump sum from their pension accounted for 17 per cent while those who used stocks and shares represented 16 per cent.

A further 16 per cent liquidised their investments and 11 per cent sold their business to assist their children.

 

Support is now a ‘necessity’ 

Jon Cooper, head of mortgage distribution at Aldermore said: “Young people have had a stark fall in home ownership the past two decades, as the challenging environment of high house prices, shortage of suitable homes, and weak wage growth have hindered home buying chances.  

“The Covid-19 pandemic has only increased the difficulties faced by new buyers meaning support from the Bank of Mum and Dad has increasingly become a necessity, rather than just a helping hand.  

He added: “This generation of first-time buyer is more diverse in financial circumstances than ever before, but there are also more pathways to home ownership than a decade ago.  

“It may feel daunting and confusing at times so we would recommend seeking advice from a mortgage broker that can give a whole of market view of both high street and specialist lenders.” 

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