The Bank of Mum & Dad (BOMAD) provided an estimated £9.4bn in gifts and loans to help first-time buyers get onto the property ladder in 2023, according to the latest analysis from property firm Savills. This figure marks a significant increase from previous years, nearly doubling since 2019, driven by a more stringent mortgage market and rising mortgage rates.
In 2023, around 164,000 first-time buyers received family assistance, accounting for 57% of all mortgaged first-time buyers. Although the number of assisted buyers has decreased from a peak of 198,000 in 2021, this is the highest proportion of first-time buyers receiving help since 2012, representing a 10% increase from 2022.
Frances McDonald, director of residential research at Savills, explained the trend: “While many homebuyers enjoyed record low interest rates during the early part of the decade, more stringent mortgage requirements, which have been in place since the start of the pandemic, have impacted higher LTV lending, most commonly used by first-time buyers. In addition to this, record rental growth and increased mortgage rates (particularly for high LTV products) have acted as a further blow to first-time buyers’ home-owning aspirations.”
As mortgage rates remain high, more first-time buyers have needed family support to secure home purchases. The Bank of England reported that average quoted mortgage rates for 90% and 95% LTV products stood at 5.66% and 6.08% in July 2024, respectively. Although these rates have eased from their peaks, they remain significantly elevated compared to the past two years.
Looking ahead, Savills forecasts that as mortgage rates continue to decrease, the proportion of first-time buyers needing support from the Bank of Mum & Dad may decline slightly. While the total number of supported buyers is expected to remain steady in 2024, the proportion is anticipated to drop from 57% in 2023 to 54% in 2024. The total contribution towards first-time buyer purchases is projected to remain at £9.3bn in 2024, with nearly £30bn expected to be paid out over the next three years.
Despite the potential decrease in demand for family assistance, McDonald noted that buyers will still face challenges: “Despite the Bank of England’s recent decision to cut the base rate, we expect that lenders will continue to favour less risky, lower LTV mortgage lending. This means that buyers will still have a hard time getting their first foot on the housing ladder.”
McDonald added that those who can rely on family support and have secure employment will continue to find it easier to enter the housing market. “Only the highest earners and those who have received significant support are likely to be able to buy at the top end of the market,” she said.
