How ‘bank of mum and dad’ is helping homebuyers
Parents are giving their children £2bn a year to help them buy their first homes, according to the housing charity Shelter.
The average contribution from the “bank of mum and dad” is £17,000, more than half of the £28,000 deposit typically needed.
Shelter says the £2bn figure is almost double the £1.1bn the government spends spends on affordable homes in England.
The figures compiled by NatCen Social Research show that since 2009, 27 per cent of first-time buyers have relied on parents to help them raise a deposit, compared with fewer than 17 per cent before the financial crisis began.
This is putting a strain on parents’ finances, with 22 per cent of parents saying their retirement savings are taking a hit so they can help their children.
Shelter says this situation is unsustainable and wants the government to do more to ensure that affordable homes are built.
‘Desperate’
Campbell Robb, chief executive of Shelter, said: “The fact that the bank of mum and dad has to play such a central role in our housing market shows just how desperate the situation has become for a generation that’s priced out of a home of their own.
“Something is seriously wrong when people who work hard and save each month still have no hope of buying a home without significant financial support from their parents.”
On Tuesday, Chancellor George Osborne outlined the second phase of the government’s help to buy scheme, which is aimed at would-be homeowners without big deposits.
The first phase started in April and is for new-build homes of up to £600,000, with a total of £3.5bn available over three years.
Buyers need a 5 per cent desposit, the government lends 20 per cent of the value of the property, and the remaining 75 per cent comes from a bank or building society.
The second phase begins in January 2014 and is for all homes of up to £600,000. It will also run for three years, with up to £12bn available to support £130bn of mortgages.
Again, participants need a 5 per cent deposit. The remaining 95 per cent comes from the lender, with the government bearing some of the risk.
170,000 affordable homes
Housing Minister Mark Prisk said: “Shelter’s report fails to take into account the 170,000 new affordable homes we’ll have built by 2015, or the £3.3bn we’re investing to provide a further 165,000 new homes in the three years to 2018 – leading to the fastest annual rate of affordable housebuilding for two decades.
“On top of this, our help to buy scheme is offering a valuable alternative to the bank of mum and dad, by enabling people to buy newly-built homes with just a fraction of the deposit they would normally require.”