First-time buyers increasingly rely on family financial support
The Council of Mortgage Lenders (CML) has reported that almost 50% first-time buyers under the age of 30 look for family help to secure their first mortgage.
Financial help from relatives has always played a part in a fortunate minority getting a foot on the property ladder but the need has been increasing; in 2006, only 38% of first-time buyers raised cash in this way.
According to Nationwide’s house price index, the cost of a home has fallen by nearly 15% in the past year but the tighter lending criteria resulting from the credit crisis has meant that lenders demand higher deposits.
As a result, large numbers of first-time buyers are still excluded from the market.
According to the CML the average first-time buyer needed to put down a deposit of £19,000 during the second quarter of 2008, up from £14,500 a year earlier.
CML members are now warning that parents may not be able to continue their support.
In the past, some have remortgaged their homes to provide cash for children but with property prices falling and lending tight, this option has become less accessible.
In addition, as the UK enters a recession household finances may become too stretched to help out in this way.
First-time buyer purchases are already at record lows and the CML sees the withdrawal of family financial support as an emerging factor that could further blight the UK property market.