Parental property wealth drives up home ownership prospects

Parental property wealth drives up home ownership prospects
Young people whose parents have property wealth are nearly three times more likely to get onto the property ladder by the age of 30 than those whose parents don’t own a home.

According to research by the Resolution Foundation, it would take a first-time buyer aged between 27 and 30 around 18 years to save for a deposit if they had to rely solely on savings from their own disposable income. Two decades ago, it would have taken about three years to save up a deposit.

Only 11% of young people whose parents have no property wealth are themselves homeowners, compared to more than a third of people whose parents do own property.

The think tank also found that young people whose parents have high levels of wealth are more likely to have a degree and typically earn over £500 more per month than those whose parents aren’t wealthy. Both these facts can help them get onto the property ladder sooner.

Help for those without access to the Bank of Mum and Dad

If you’re trying to buy a home but can’t rely on financial support from the Bank of Mum and Dad, there are still options available.

Many lenders offer mortgages to those with only a 5% deposit to put down, with Bank of England figures showing that interest rates on two and five-year deals have fallen to their lowest level since 1995.

The average two-year fixed rate for someone looking to borrow 95% of the property value currently stands at 3.33%, the Bank said, down from 4.02% in 2017. For five-year mortgages, the average rate is 3.89%, down from 4.71% in the same month the previous year.

Government help

There are also various government schemes to help first-time buyers with limited deposits, including those who are struggling to save.

For example, if you save into a Help to Buy ISA, the government will top up any contributions you make by 25%. The maximum bonus they’ll give you is £3,000 and you can use this and the money you’ve saved to buy a property costing up to £250,000 or less, or up to £450,000 if you’re buying in London.

There’s also the Lifetime ISA, which is designed to help first-time buyers or those saving for retirement. Again, the government will boost your contributions by 25% and you can use the proceeds to buy a home costing up to £450,000 anywhere in the UK. You must be aged under 40 to open a Lifetime ISA.

If you’ve already managed to save a deposit but can’t afford to put down more than 5%, there’s the Help to Buy equity loan scheme too. This is available to those purchasing new-build properties costing up to £600,000. Once you’ve put down your 5%, the government will lend you a further 20% of the property price interest-free for the first five years, rising to 40% if you’re buying in London.

Find out more about the help that’s available in our guide to government schemes for first-time buyers. You can learn more about Help to Buy in our guide to Help to Buy .

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