Housing Solicitors

New research by the Social Mobility Commission shows that more first-time buyers are relying on their parents help them get onto the property ladder.

The proportion of first-time buyers relying on inherited wealth or loans from the “bank of mum and dad” has reached a historic high and the trend looks set to continue, says the Social Mobility Commission.

The Commission warns that the increasing trend will have damaging consequences for social mobility, as young people on lower incomes are finding it almost impossible to get a foot on the housing ladder.

Analysis of government and housing market data by researchers from the University of Cambridge and Anglia Ruskin University finds that the proportion of young people embarking on home ownership has fallen dramatically.

For 25- to 29-year-olds, home ownership has fallen by more than half in the last 25 years – from 63% in 1990 to 31% most recently.

Many of those who do manage to buy eventually can only do so at an older age.

Increasingly, young people are relying on the “bank of mum and dad” to get a foot on the housing ladder – more than one-third of first-time buyers in England (34%) now turn to family for a financial gift or loan to help them buy their home, compared with one in five (20%) seven years ago.

Figures show a further one on ten rely on inherited wealth – and more than one in ten (12%) of existing owners also benefited from a gift or a loan when buying a new home.

With housing tenure remaining one of the main ways in which wealth is held and transferred through generations, the report warns that difficulties in buying homes are becoming a barrier to improving social mobility in the UK.

In the UK, around one-third (30%) of households with dependent children currently hold assets that could be used towards a deposit for the purchase of a home.

However, in respect of social mobility, the report notes that around only 10% of households without any formal educational qualifications for two successive generations feel able to assist their children with homeownership costs.

The report also finds that first-time buyers who receive money or a loan from their parents can buy 2.6 years earlier than those who do not – in London, this figure rises to 4.6 years.

The average income of households in London who rely on support from parents is £40,900, compared with £42,400 for those who do not.
Researchers project that the number of future first-time buyers will rise slightly in the short term, then fall gradually over the next 25 years.

The speed and the extent of the rise and fall will be determined by the robustness of the economy.

If economic activity weakens, the proportion of first-time buyers relying on their parents is set to stay at the current level of 34% until 2024-2025 –
and will then rise to nearly 40% by 2029.

If economic activity increases, the number of those relying on “bank of mum and dad” is projected to reach a peak of 39% at an earlier stage (by 2021-2022) and then fall back.

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