Parents unaware of how to help today's first-time buyers
Despite a growing reliance on the Bank of Mum and Dad, over half (53%) of parents of potential first-time buyer children (i.e. 18 to 35 year olds) are not willing to take financial advice to ascertain how best to support their children's home purchase and 38% of parents surveyed said they were unaware of any of the major four mortgage products designed to help their children take their first step into homeownership research from the UK's largest first-time buyer lender, the Halifax, reveals.
Often regarded as both a source of wisdom and funds, the Bank of Mum and Dad has helped many homebuyers secure their first property, nearly a third (32%) of parents questioned said that they are both willing and able to financially support their children's purchase. However, there could be a disparity between those parents who believe they are in a position to help their children and those who think they aren't (61%). The housing and mortgage market is a different animal for today‘s house buying generation and as such many parents could be under the misconception that the only way to help their child's purchase is to stump up the cash for a deposit, which for many remains unaffordable. By swotting up and taking advice parents may find that they can provide a step up onto the ladder afterall.
Innovations in the mortgage market over recent years have meant that there are now a number of products designed with first time buyers in mind, yet parents' awareness levels of these products remains limited. Only around one in five parents (21%) have heard of guarantor mortgages, and just over a quarter understood that a mortgage could have multiple applicants such as friends and family to spread the monthly costs.
Despite a general assumption that life for past generations was much tougher, when it comes to housing, today's parents appear to be acutely aware of the challenges - 79% believe that it is more difficult for their children to buy their first home than it was for them. However, recent CML data on affordability reveals that monthly mortgage payments as a percentage of monthly income, currently 28%, are below the long term trend of 34% average over the past 25 years. Only 18% of parents view the current economic environment as an opportunity to take advantage of lower rates and prices, just 8% of those whose children have not stepped onto the property ladder are concerned about slow house price growth so wouldn't invest in their child's first home at the moment.
Stephen Noakes, Halifax's commercial director for mortgages comments: "The bank of mum and dad is an important crutch for many first-time buyers, yet our research demonstrates that parents aren't as savvy as they could be when it comes to deciding how best to help. Times have changed; traditionally first-time buyers turned to their parents for a hand-out but for many giving a deposit or paying off debts is not financially viable. Whilst it's important that first-time buyers understand everything that is involved in buying a home, for many parents getting a better understanding of the state of the market and the range of products available today may make a difference to homebuyers and parents alike."
Key Findings
38% of parents have not heard of common first-time buyer mortgage products.
Over half (53%) of parents are not willing to seek financial advice to understand how to support their child's home purchase
Almost a third (32%) of parents are willing and able to help their purchase a home.
79% say it is more difficult for today's buyers than when they bought their first home.
55% of parents who would be both willing and able to financially help their children buy their first home will supply white goods or furniture, 48% gift the deposit monies, almost a quarter (24%) will offer to pay moving fees and one in five will use a guarantor mortgage.
28% say that the changed economic environment hasn't affected their ability to provide help.
13% are more able to help than this time three years ago.
16% of those whose children have not already bought their first home believe that the current economic environment provides a good home buying opportunity for their children as they can benefit from low interest rates and house prices.
13% of parents believe that helping their children is a better use of money as they are not getting a high return on their savings.
Less than one in ten of these parents are worried about low house price growth and would therefore be reticent to provide support for a home purchase.