Gifts and loans from the Bank of Mum & Dad (BOMAD) totalled £8.8bn in 2022, according to the latest analysis from Savills.

This amount has increased by almost £4bn since the start of the pandemic (2019), as a result of a more stringent mortgage market and higher deposit requirements.

In total, 170,000 first-time buyers had family assistance in getting their mortgage in 2022, accounting for around 46% of all mortgaged first-time buyers, down from a peak of 198,000 in 2021. However, this number is expected to jump to 61% in 2023, a figure not seen since before Help to Buy was introduced. This means that just two in five first-time buyers are likely to access the market without any help.

“Whilst many homebuyers enjoyed record low-interest rates during much of 2020 and 2021, mortgage rates for high 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,” said Frances McDonald, director of residential research at Savills.

“According to the latest Nationwide figures, house prices across the UK have risen 19% since the start of the pandemic – despite prices falling for six consecutive months to February– increasing the average house price to £257,000, creating a double whammy for first time buyers. Not only are they facing higher interest rates, many are also continuing to struggle to ensure their savings keep pace with rising average deposits, particularly as rents have also increased and inflation impacts the cost of living.”

Bank of Mum and Dad post Help to Buy

Higher mortgage rates and the end of Help to Buy are expected to increase lending from the Bank of Mum and Dad.

Savills has forecast that mortgaged first-time buyer transaction numbers will fall back to approximately 200,000 in 2022, 43% below the pre-pandemic norm. However, the proportion of first-time buyer purchases receiving support is expected to increase from 46% in 2022 to 61% in 2023 – with three in every five buyers expected to receive support.

The total contribution of gifts and loans is also expected to fall, as a reflection of overall transaction numbers in 2023, but is still expected to total £26bn over the next three years (2023-2025).

“Since the Help to Buy scheme was introduced in 2013 it has supported more than 335,000 first-time buyers – providing £2.2 billion of financial assistance in 2022 alone (bringing the total support received by first-time buyers to more than £11 billion). 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,” continued McDonald.

The average quoted two-year fixed rate mortgage rates for 90% and 95% LTV ratios (those most likely used by first-time buyers) were 5.38% and 5.95% in February 2023, respectively, according to the Bank of England.

McDonald added: “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.”

Table 1: Numbers of first-time buyers receiving family assistance and amount of assistance given to get on the housing ladder