Recent research has shown that one in 12 properties purchased in the UK is partly funded by a gift from a friend or family member.
90,900 out of the 1.125 million home purchases made during the past year, involved a gifted or partly gifted deposit, according to online conveyancer, My Home Move.
Compared to the previous year, this is an increase of 29.6%, whereas purchases in general rose by only 3.6%.
The study also revealed that of first-time buyers, 17% relied on a gift from a friend or family member to buy a home.
A large portion of deposit contributions may be courtesy of ‘The Bank of Mum and Dad’, which insurer Legal & General have estimated to be the UK’s tenth largest lender.
Commenting on the growing rate of contributions from third parties was Doug Crawford. The Chief Executive of My Home Move stated:
“With property prices racing ahead of earnings, we’re expecting to see the gifted deposit rate surpass the 10% mark soon.
“However, a large-scale reliance among first-time buyers on gifted deposits is unsustainable, so it is important that those without the luxury of a gift from family and friends can get on the ladder, if the market is to work for everyone.”
As house prices grow and earnings struggle to keep up, relatives have been encouraged to give children and grandchildren funds to help get onto the property ladder. This stems from research released in October, which indicated that £1.5 trillion of property wealth in England, is owned by the over-55s.
My Home Move’s data suggests that this year, contributions from relatives have been used more frequently than the Help to Buy ISA scheme.
Despite over half a million ISA accounts being created, figures released by the Government indicate that the resulting bonuses used were worth around £2 million, being utilised in 38,595 transactions.
From those collecting the bonuses, the average age is 27, which does suggest that the ISAs are enabling younger people to get onto the property ladder. The national average age of a first-time buyer is 30.
The average cost of home purchases made by those using the ISA bonuses is also less than the national average for first-time buyers. These amount to £169,045 and £183,000 respectively.
