Parents helped many young buy homes

couple at estate agentsAlmost a fifth of first-time buyer sales would not have happened last year without help from the "bank of mum and dad", a report has suggested.

Transactions worth £5.3 billion in 2011 were "likely to have been impossible" without families stepping in to help plug the funding gap, according to estimates from the Centre for Economics and Business Research (Cebr) for HSBC.
The report estimated that around 104,000 first-time buyers have been helped by relatives to make purchases worth more than £23 billion between 2008 and 2011. This makes up around 13% of a total of 778,000 first-time buyer transactions in the UK during this period.

The findings came in the same week that the Liberal Democrats suggested parents and grandparents should be able to use their pension pots as a guarantee to mortgage lenders to help the younger generation get access to a deal.

Many first-time buyers have been forced to turn to their families for extra help as lenders have toughened their borrowing criteria amid the uncertainty of the economy and the availability of loans requiring smaller deposits has shrunk back.

Between 2008 and 2011, the total value of first-time buyer transactions in the UK fell from £30.2 billion to £28.5 billion per year, Cebr said.

Nearly two thirds (63%) of 1,000 first-time buyers surveyed said they had asked for financial help from a family member.

Around 85% of them said they had done so because they found turning to a relative cheaper and less stressful.

The typical size of a parental gift or loan varied widely, with first-time buyers aged up to their mid-20s receiving around £19,000 and those aged from their mid-30s upwards receiving more than £42,000 on average. Londoners receiving family financing were handed almost £39,000 each, while people in the North East received less than half this sum, at just over £17,000.

Daniel Solomon, Cebr economist and chief author of the report, said: "To some extent, families have moved in to fill the gap - providing gifts and loans to their first-time buyer relatives. Families' contributions have been invaluable, helping thousands to get on to the housing ladder who would have missed out otherwise."

© 2012 Press Association
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