Home Money Bank of Mum and Dad to pay £30bn to help children buy homes over next three years

Bank of Mum and Dad to pay £30bn to help children buy homes over next three years

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Helping hand: Bank of Mum and Dad gifts and loans totalled £9.4bn in 2023, helping 164,000 first-time buyers
  • More than half of first-time buyers with mortgages received support in 2023

The Bank of Mum and Dad is expected to pay out almost £30bn over the next three years to give their children a boost in access to property.

According to estate agency Savills, £9.4 billion was handed over to first-time buyers in 2023, a year in which property transactions fell by around 20 percent.

While there were fewer first-time buyers last year, those who did needed more help because of higher mortgage rates.

In total, 164,000 first-time buyers relied on family help to purchase their first home (57 percent of all first-time buyers with mortgages).

Helping hand: Bank of Mum and Dad gifts and loans totalled £9.4bn in 2023, helping 164,000 first-time buyers

This was the highest proportion of first-time buyers receiving assistance since 2012, and represents a 10 percent increase from 2022.

Parents are expected to pay a total of £30 billion to their adult children between 2024 and the end of 2026.

While the overall number of first-time buyers receiving financial help from family has fallen from a peak of 198,000 in 2021, Savills says the amount borrowed or gifted has almost doubled since 2019.

Frances McDonald, head of residential research at Savills, said: ‘While many homebuyers enjoyed record-low interest rates during the early part of the decade, stricter mortgage requirements, which have been in place since the start of the pandemic, have impacted on lower-deposit loans, more commonly used by first-time buyers.

‘On top of this, record rental growth and rising mortgage rates have acted as a further blow to the homeownership aspirations of first-time homebuyers.

‘As a result, a higher proportion of people needed support to access housing, and those who could do so took advantage of family support to try to get a deal on a lower mortgage rate.’

Cheaper mortgages to reduce parents’ contributions

In recent weeks, mortgage rates have been falling and lenders are competing fiercely to win business.

As mortgage rates continue to fall, Savills has predicted that a smaller proportion of first-time buyers are likely to need support from the Bank of Mum and Dad.

The proportion of first-time homebuyers receiving support will fall from 57 percent in 2023 to 54 percent this year, it has suggested.

Savills expects the total contribution to first-time home purchases to remain in line with 2023 levels (£9.3bn).

“Despite the Bank of England’s recent decision to cut the base rate, we expect lenders to continue to favour less risky mortgages with lower loan-to-value ratios,” McDonald added.

‘This means that buyers will still have a hard time taking the first step into the real estate market.

‘Those who have the option of receiving family support and are secure in their employment will find it much easier to access housing and only those on higher incomes and those who have received significant support are likely to be able to buy at the top end of the market.’

How to find a new mortgage

Borrowers who need a mortgage because their current fixed-rate contract is ending or are purchasing a home should explore their options as soon as possible.

What if I need to refinance my mortgage?

Borrowers should compare rates, talk to a mortgage broker and be prepared to act.

Landlords can close a new deal six to nine months in advance, often with no obligation to accept it.

Most mortgage agreements allow fees to be added to the loan and only charged at the time of contracting. This means borrowers can lock in a rate without paying costly origination fees.

Please note that by doing this and not paying off the fee at the end, interest will be paid on the fee amount for the entire term of the loan, so this may not be the best option for everyone.

What if I’m buying a house?

Those with home purchases lined up should also try to get rates as soon as possible, so they know exactly what their monthly payments will be.

Buyers should avoid over-stretching themselves and be aware that home prices can fall as higher mortgage rates limit people’s borrowing capacity and purchasing power.

How to compare mortgage costs

The best way to compare mortgage costs and find the right deal for you is to speak to a broker.

This is Money has a long-standing partnership with free broker L&C, to provide you with expert, free mortgage advice.

Are you interested in seeing today’s best mortgage rates? Use This is the best mortgage rate calculator from Money and L&C to display offers that match your home value, mortgage size, term, and fixed rate needs.

If you’re ready to find your next mortgage, why not use L&C’s Online Mortgage Finder? This will search through thousands of offers from over 90 different lenders to discover the best option for you.

> Find your best mortgage offer with This is Money and L&C

Please note that rates can change quickly, so if you need a mortgage or want to compare rates, speak to L&C as soon as possible so they can help you find the right mortgage for you.

The mortgage service is provided by London & Country Mortgages (L&C), which is authorised and regulated by the Financial Conduct Authority (registration number: 143002). The FCA does not regulate most buy-to-let mortgages. Your home or property may be repossessed if you fail to keep up your mortgage payments.

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