More UK home buyers turning to siblings, instead of parents, for mortgage deposits

LONDON – Britain’s often envied “bank of mum and dad”, used by first-time home buyers to scrape together a mortgage deposit, is drying up.

Parents accounted for 72 per cent of family members contributing to first-time buyer deposits in the year through July, according to analysis from broker Hamptons International using Skipton Building Society data. That is down from 74 per cent in 2022, and 80 per cent in 2018, as new home buyers increasingly call on siblings to help them pull together a deposit.

“As home ownership rates decline through the generations, younger parents today are less likely to be home owners than their predecessors,” said Ms Aneisha Beveridge, head of research at Hamptons. This “reduces their ability to withdraw equity from their home to pass on to children”, she added.

UK households are facing a stream of cost pressures triggered by pricey borrowing and inflation that is slowly dropping back from generational highs. That has led to a slump in first-time buyer sales, as wannabe home owners remain stuck in ever-pricier rental contracts while mortgage costs surge.

Some 32 per cent of mortgaged first-time buyers received family support towards their deposit in the first seven months of 2023, which is slightly higher than in 2022, but down from 40 per cent in 2017. While the proportion of parental contributions declined, the share of siblings supporting first-time buyers has almost doubled to 11 per cent in the past three years, the data shows.

“Should interest rates stay higher for longer, it will exacerbate the gap between what those with and without family help can afford,” Ms Beveridge warned. “Those without help will likely face saving up for longer and buying later in life or purchasing a smaller home.”

UK parents gift about £14 billion (S$23.9 billion) a year to their children, according to the Institute for Fiscal Studies, often to help with the large deposits needed to get onto the housing ladder. More than half of the value of transfers is made by the wealthiest fifth of adults – mostly home owners living in London and the South East – raising inequality concerns when it comes to home ownership. 

Over a third of first-time buyers with family backing put down a deposit of at least 20 per cent so far in 2023, more than double the share of those purchasing without support. What is more, London first-time buyers were gifted an average of almost £35,000 in the same period – over two times the national average of about £14,000.

Ms Charlotte Harrison, interim chief executive officer at Skipton, said: “With high property prices, escalating rents and the cost-of-living squeeze further impacting people’s ability to save for a house deposit – it’s making it almost impossible for people to get onto the property ladder without a boost to their savings.”

Still, London home buyers are less likely to receive mortgage support than elsewhere in the country. Fewer than a third of first-time buyers in the capital have been gifted a deposit contribution in 2023 – just below the national average – compared with 40 per cent in Yorkshire and The Humber, where house prices are much lower, according to Hamptons.

“Not everyone is lucky enough to have access to family wealth in this way,” Ms Harrison said. “For many, despite potentially being able to pass a typical mortgage affordability check, it’s the lack of a deposit that’s holding them back from their home ownership aspirations.” BLOOMBERG