Half Of Parents Will Be Funding First Time Buyer Mortgages
18 July 2008 / by Rachael Stiles
With first time buyers having to find a total of more than £4.2billion to get a foot on the property ladder this year, more than half of parents have said that they will be helping their children to afford their first mortgage.
The Children’s Mutual has found that the 214,800 people wanting to buy their first home this year will need an average of £19,780 each to fund their first time buyer mortgage, now that 100 per cent mortgages have become hard to come by.
Instead of being able to borrow the entire value of their property and more, homebuyers are now required to put down a deposit of at least five per cent or more if they want access to the most competitive deals.
In many cases, the parents will be footing the bill as the credit crisis hits home, The Children’s Mutual has warned.
“As the credit crunch bites, pressure is increasing on parents from all sides.” said David White, chief executive of The Children’s Mutual. “The challenge faced by many parents of young children in particular is how to provide for their children now while simultaneously preparing for their futures. The sums of money needed to give their children a boost into adult life will require careful planning.”
Mr White continued to say that even allowing for the recent fall in house prices, historic house price inflation, and the scarcity of 100 per cent mortgages, “it is all but impossible for first-time buyers to get a foot on the property ladder” without first saving up a substantial deposit, which is hard to do as tighter budgets leave less room for savings.
The Children’s Mutual predicts that 110,000 potential first time buyers will be left out in the cold due to the reduction in availability of high loan to value mortgages, as they struggle to find a big enough deposit without mum and dad’s help.
The company is urging parents of young children to consider savings and investments on behalf of their children now, so that the next generation of home buyers does not have to suffer the same difficulty. The research also found that 40 per cent of today’s teens do not think that owning a home will be an option for them without their parent’s assistance.
Mr White said: “We are set for a seismic shift in the way the UK manages its money. With easy credit rapidly evaporating, we’re predicting a return to a ‘save now, buy later’ culture, which should be welcomed by most quarters.
“The Child Trust Fund was introduced to make it easier for parents to save for their children’s futures. We believe that a greater number of maturing Child Trust Fund accounts may well help deliver debt free university education which in turn could facilitate young people getting a foothold on the property ladder without sizeable parental pay outs. Conditions for first-time buyers are becoming increasingly tough at present, and the Child Trust Fund enables parents to give their children a head start towards one of life’s most important and expensive future purchases.”
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