Last year, according to one estimate, more than half of first-time home buyers in the UK now require help from their parents. It highlights the impact of this important financial institution, the “bank of mum and dad.” Recent National Association of Realtors data found that 52% of homebuyers borrowed from their families. This meant, on average, each household only had to chip in £55,572. This support added up to over £9.6 billion in support, helping over 173,500 first-time buyers achieve home ownership.
Next year, first-time buyers are likely to be faced with relatively high mortgage rates. Today’s average fixed rates for two and five-year mortgages are between 5% to 6%. This rise in borrowing costs has created a historic barrier to home ownership. Even those who want to buy face headwinds from high mortgage rates. To add more salt to the wound, rental prices just jumped up well over 9% last year, further squeezing their unstable finances.
With rapidly rising cost-of-living levels, first-time buyers are under more financial pressure than ever. Stunning rental price increases are forcing many others to accelerate their home purchase timelines. They intend to save the state money in the long run by making this switch. Relatives are becoming the newest, unsung most important funders. They’re supporting their children as they struggle to understand and adapt to a new and much harder housing market.
You might like First-time buyers continue to feel the impact of elevated mortgage rates. They’re subject to a higher standard of lending too,” said Savills head of residential research Lucian Cook. He noted that extended family support would increase economic demand. He thinks this would occur at a greater cost savings on average cost per buyer.
Mortgage rates are throwing up huge obstacles for would-be buyers. What’s more, recent changes to stamp duty regulations are influencing their decisions. As a result, first-time buyers in England and Northern Ireland now pay stamp duty on homes costing more than £300,000. This amendment raises the previous threshold of £425,000. This change has released a wave of first-time buyers into the market. They’re excited to get their orders in before the end of March, looking forward to improved features!
We might start seeing regulators open up a little on some areas of lending criteria. These adjustments would bring much-needed relief to first-time homebuyers and their families. That means reducing the barrier for entry and letting first-time buyers be able to qualify for larger mortgages,” Cook continued.
Family support reached an all-time high in the wake of the financial crisis in 2009, when 70% of all first-time buyers got help. Dedicated families are making even more efforts to assist their children with loans and gifts to provide these funds. They are eager to bust through the barriers created by high mortgage rates.