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Bank of Mum and Dad
Still relying on your parents? Don’t panic-you are not alone. Half of all first time buyers under the age of 30 are still looking to their mum and dad to help them get onto the property ladder.
Recent research from the Council of Mortgage Lenders (CML) shows that lenders have lowered their loan-to-value ratios on mortgages – the amount that can be borrowed against the value of a home – and so parents have stepped in to fill the gap.
As higher deposits are needed, many prospective homeowners have no choice but to ask for help. The average deposit now is £35,000, compared to £29,201 a year ago, as average LTVs on mortgages have dropped from 80.6 per cent to 75.3 per cent.
The CML said: “Those who are fortunate enough still to be able to call on parents or others for help have been able to reduce their risk profile – borrowing less relative to the property’s value and their income – while those who cannot remain as stretched as they were before the onset of the credit crunch.”
Meanwhile, research by market research company BDRC shows 40 per cent of homeowners over 45 have offered financial assistance to help their children get onto the housing ladder.
The research also showed over half of potential first-time buyers – those planning to buy in the next two years - are not currently saving for a deposit.
Mark Long, BDRC client services director, said: “Clearly many potential first-time buyers are simply not making adequate financial plans to be in a position to afford a home – either because they can't afford to, or because they don't care to.
“The current turmoil in the financial markets suggests that the Bank of Mum and Dad may not be in a position to offer help in the future.
“This could have a significant impact on any recovery in the housing market,” added Mr Long.
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