The struggles facing young people as they try to get onto the property ladder are impacting the financial future of their parents and families. In-depth research conducted by Halifax, the UK's largest first time buyer lender, and the NatCen Social Research shows:
Half of 20-45 year olds think that Britain will become a nation of renters within a generation
The reliance on the Bank of Mum and Dad leaves a third of parents concerned for their own financial future
Just 14% of non homeowners between 20-45 years old are actively saving for a deposit
Only 8% of parents believe first time buyers should borrow money for a deposit, yet 44% have, or have plans to contribute an average of £12,800(i)
24% of parents have had their children move back home as adults due to the current market
Stephen Noakes, Mortgage Director at Halifax, commented: "Our research shows that one year on, young people are still downbeat about their chances of owning a home, and we're also seeing the impact this has on their parents' financial future. Parents think that their kids could make cutbacks on holidays and going out in order to save for a deposit. However, despite concern for their own financial future, parents continue to stump up a contribution or welcome their children back to the nest to allow them to save.
Alison Park, Head of Society & Social Change at NatCen Social Research, says: "Parents are not very keen on their children borrowing money from family and friends as a way of contributing towards a deposit, while younger generations are much more accepting. Both generations make similar sacrifices to buy their first home, but today's young people are looking more and more towards their family for support."
Support for home-ownership…but expectation of Generation Rent
Just over half (54%) of 20-45 year olds believe that Britain should remain a nation of homeowners, with an overwhelming 78% agreeing that it is a good financial investment. However, despite this, of the 8,042 20-45 year olds questioned:
25% do not want to own a home (an increase of two percentage points on 2011)
Two in five (40%) would like to buy a home but do not believe they will ever be able to
Just 31% have a serious intention to buy within the next five years
50% believe Britain will become a nation of renters within a Generation (up four percentage points since 2011).
Deposit continues to be the biggest hurdle
The size of a deposit, high house prices and job security are the top three barriers to home ownership according to Generation Rent. In addition, 91% of parents believe that the current UK economy is discouraging first time buyers (FTB) from buying a property, in line with 87% of 20-45 year olds who fear that it is a risk to buy a home in today's economy.
Whilst the average FTB deposit in today's market stands at £24,647, the research found that:
26% have savings of less than £3,000 and 35% have no savings at all
On average, people aged between 20 and 45 who have savings have an average of £9,420
Men have twice as much saved up as their female counterparts (£12,550 compared to £6,380).
However, 80% admitted to spending money they could otherwise be saving for a deposit. More than a third (35%) spent this money on eating out, followed by clothing (32%) and holidays (31%).
Alongside eliminating stamp duty for first time buyers (38%), the Government's NewBuy scheme (32%) are cited as the policies which are most likely to encourage those 20-45 year olds get on the property ladder.
Generational shift in spending and saving
Nearly a quarter (23%) of 20-45 year olds are relying on money borrowed from friends and family to get on the property ladder compared to 11% of their parents' generation. However, just 8% of parents feel that 20-45 year olds should be borrowing money for this purpose. 79% of parents believe the younger generation should instead go on fewer or cheaper holidays and 77% say the younger generation should cut down on going out in order to save for a deposit.
Notably, although a quarter of today's generation stay at home in order to save for a deposit, just 16% of their parents' generation did the same.
Parents digging deep
Over a third (38%) of parents have made financial contributions to help their offspring get on the property ladder. The total amount of money family members are giving or lending to children has been estimated to have increased by 31% to an average of £12,846 in the past five years.(iii)
This support manifests itself in various ways:
26% have already contributed to a deposit and a further 19% expect to do in the future
31% of parents are dipping into their savings and14% have given their child some or all of their inheritance early
6% contribute to monthly mortgage payments or expect to do so in the future
24% of parents have revealed that their children have at some point moved back in with them as a result of not being able to buy their own property
Mortgage application process still deterring buyers
Parents are even more pessimistic than their children about the mortgage application process, with 66% and 60% respectively believing that it's very hard or virtually impossible to get a mortgage. However, just 39% of parents think that this puts people off from applying, compared to 61% of 20-45 year olds.
Nearly three in five (59%) potential homeowners believe that lenders accept less than 40% of mortgage applications.
Stephen Noakes explains: "Despite the launch of various initiatives to support first time buyers such as NewBuy, both young people and their parents share a view that it is difficult, or even impossible, for first time buyers to get a mortgage, which this is clearly a point we need to continue to address. The reality is we continue to approve eight out of 10 first time buyer applications, more than double the amount that people expect us to."
Find out more
You can read the report here and a fact sheet about Generation Rent here.