The Rise of the Bank of Mum and Dad
In order to get onto the property ladder these days, many young people find themselves relying upon the ‘bank of mum and dad’. In fact, it’s estimated that one in four first time buyers need to rely on their parents to help them fund the deposit.
It’s a trend which doesn’t appear to be slowing down. This has led many mortgage lenders to start offering products designed to help parents get their children into the housing market.
Here, we’ll look at why more people than ever are relying upon financial help from their parents. You’ll also see what you can do if you don’t currently have the funds to help towards your child’s deposit.
Why is the bank of mum and dad on the rise?
There’s a number of reasons first-time buyers are having to rely more upon the bank of mum and dad these days. Firstly, the cost of property has soared in recent years, meaning the deposit required to get onto the property ladder has also increased significantly. The average house price in 2016 was £210,000, whereas in 1995 that figure was just £52,000. That’s a dramatic increase over the past decade.
It’s not just the mortgage and deposit prices which have increased. Rental prices and the cost of living have also gone up dramatically over time. Wages have yet to catch up, leaving most first-time buyers simply unable to afford to save for the deposit. So they’re turning to their parents to give them a head-start.
Location is everything
While it’s difficult for first-time buyers to get onto the property ladder in any area, there are some areas which are more expensive than others. As you’d expect, the cost of getting onto the property ladder in the UK’s capital is particularly high. In fact, it’s recently been revealed that single first-time buyers in London need to save up for a staggering 17 years to obtain the 15% deposit required.
Those who are looking to get on the property ladder for the first time would therefore be better off looking in different areas of the UK. Leeds properties, for example, are much more affordable in comparison, though many still need help from their parents to afford the deposit.
How can you help your kids get on the property ladder?
If you’re looking to help your kids get onto the property ladder, there are a few options. Mortgage lenders have recognised that many first-time buyers rely upon their parent’s money, so they’ve started offering products specifically for this purpose.
Re-mortgaging your property is the first option available. This would release equity, which could then be used to pay the deposit. The second option is to take out a loan for the deposit amount against your home. The latter is riskier than the first option, but both will give you the funds you need. Thirdly, you may have savings which you could put towards the deposit.
It has become almost impossible for first-time buyers to get on the property ladder in some parts of the country. The bank of mum and dad has become an increasingly popular option, though many parents are struggling to help. It’s worth looking into more affordable areas such as Leeds, which requires much lower deposits than many other parts of the UK.