Save, make, understand money

First-time Buyer

Bank of Mum and Dad nears £9bn in 2022 with more growth to come

Nick Cheek
Written By:
Nick Cheek

Gifts and loans from the Bank of Mum and Dad came to £8.98bn in 2022, helping 170,000 first-time buyers get on to the property ladder.

According to figures from estate agents Savills, this represented an increase of £4bn since 2019, but is down from the £10.7bn loaned out in 2021.

Savills partially attributed the growth to “a more stringent mortgage market and higher deposit requirements”.

The firm continued that the number of first-time buyers, 170,000, accounted for nearly half of all mortgaged first-time buyers. However, it is down from a peak of 198,000 in 2021.

Frances McDonald, director of residential research at Savills, said: “Whilst many homebuyers enjoyed record low-interest rates during much of 2020 and 2021, mortgage rates for high loan-to-value (LTV) mortgages, most commonly used by first-time buyers, increased, and so it was more necessary for those who were able to, to take advantage of family support to try and secure a deal at a lower rate.

She added that first-time buyers faced a “double-whammy” as higher interest rates along with difficulty in savings for a deposit as house prices were around 19% up from 2019.

McDonald added that rent increases and inflation were also having an impact.

Bank of Mum and Dad lending will grow

Savills said that the proportion of first-time buyers supported by the Bank of Mum and Dad is predicted to jump to 61% in 2023. The company added that this means only two in five first-time buyers can access the market without any financial assistance from their parents or other parties.

The firm added that this would then fall in 2024 and 2025 to 59% and 55% respectively.

However, the Bank of Mum and Dad is expected to total £36bn over the next three years.

Savills said that the growth in Bank of Mum and Dad was due to higher mortgage rates and the end of Help to Buy.

McDonald said that since Help to Buy was launched in 2013, it had helped over 335,000 first-time buyers and offered £2.2bn in aid in 2022 alone.

“With no obvious scheme expected to replace the support provided, a far greater proportion of buyers will be relying on family members to help them to take their first step onto the property ladder,” she added.

McDonald continued: “Mortgage rates for high LTV products have increased significantly since last year, and lenders are still likely to continue favouring less risky, lower LTV mortgage lending which makes it harder for first-time buyers.

“Those who have the option of family support and are secure in their employment will find it much easier to get onto the housing ladder and only the highest earners and those who have received significant support are likely to be able to buy at the top end of the market.”