The number of first time buyers relying on  the bank of mum and dad has reached a historic high and the trend is set to continue.

According to research from the Social Mobility Commission over a third of first time buyers in England (34%) now turn to family for a financial gift or loan to help them buy their home.

The number of young people relying on help has increased from only 20% seven years ago and a further 10% rely on inherited wealth.

It is not only first time buyers that need parental support with 12% of home movers also benefitting from a gift or a loan when buying a new home.

Without parental help, remortgage buyers must continue to stay in their existing home avoiding the cost of moving.

Dramatic fall in home ownership

The research found the proportion of young people embarking on home ownership has fallen dramatically and many of those who do manage to buy eventually can only do so at an older age.

Young people aged 25-29 years old are finding it harder to buy with home ownership falling by more than half in the last 25 years from 63% in 1990 to 31% this year.

With competition from buy-to-let investors and reduced supply of suitable properties, prospective home buyers must continue renting and saving for a bigger deposit.

In the future the number of first time buyers will rise slightly in the short term, then fall gradually over the next 25 years and the extent will be determined by the health of the economy.

Support from parents helps first time buyers own their home 2.6 years earlier than those who do not and in London this figure rises to 4.6 years.

For London, the average household income of those relying on parental support is £40,900 compared with £42,400 for those who do not.

Higher property values for older homeowners allows the equity release buyer to access wealth using a lifetime mortgage and give to a child or grandchild for a deposit on their first home.

The report says if economic activity weakens the trend towards parental support will increase from the current 34% level to 40% by 2029. If economic activity increases it will peak at 39% by 2022 before falling back.

Home ownership needs to be supported

The Rt Hon Alan Milburn, chair of the Social Mobility Commission, said a major national effort is needed to expand opportunities for home ownership with more radical action on housing supply.

The way the housing market is operating is impeding social mobility and it is welcome that the government recognises the growing problem people face.

Home ownership helps unlock high levels of social mobility but it is currently in free-fall.

It is becoming a distant dream for millions of young people and families on low incomes that cannot rely on the the bank of mum and dad to get on the housing ladder.

Dr Paul Sanderson, the report’s lead author from Anglia Ruskin University, said pressure on housing affordability has been increasing, leading to a significant decrease in the proportion of young people entering home ownership.

Those who do manage to become first time buyers, tend to do so at a later age than the previous generation.

Affordability problems mean that parents and other family members have a critical role in assisting their children to buy their first home either by means of a gift of money or a soft loan.

Without family help to upsize, the only option is for home movers is to stay in their existing home and continue saving more for a bigger deposit.

Going forward, only better-off young people and those with parents who have already housing wealth are likely to be able to consider home ownership.

What are your next steps?

Call our LCM mortgage brokers for advice if you are a first time buyer, want to remortgage your existing home for the best mortgage deal, moving home or are a buy-to-let investor.

Learn more by using the property value tracker chart, mortgage costs calculator and equity release calculator. Start with a free mortgage quote or call us and we can take your details.

For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your property for home improvements or gift a child or grandchild the deposit on their first home.

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