According to Savills’ 2016 research – more than half of the money put towards a deposit for first-time buyers during 2016 was provided by the government’s Help to Buy scheme or the bank of Mum and Dad. New research reveals, that in 2016, 51 per cent of the £10billion put towards down payments on ‘starter homes’ was sourced by these two crucial sources of support to young buyers.


The vast majority of financial help came from parents: across the UK, 150,000 first-time buyers received parental help to raise the deposit they needed to get a mortgage, with the overall value of this assistance worth £3.45 billion. This is two and a half times higher than the amount provided by parents 10 years ago, and, according to Savills, the model looks set to continue.


So, why are first-time buyers alternatively sourcing deposits?


Rising house prices – Well firstly, property prices in the capital have risen by 78% over the past decade – an increase that has most benefited those at the top of the housing ladder.


With house prices high and wages stagnant – figures from the Office for National Statistics show wages in London have fallen in real terms since 2007 — the impact on housing affordability for first-time buyers has been huge!


As many parents are still living in the family home, while their own children are unable to afford a home of their own, many are choosing to release equity by downsizing to a more practical property in order to help their offspring on to the housing ladder.


Tighter lending criteria – While house prices have been rising, tighter restrictions on how much banks are willing to lend have also come into force. Savills data shows that the percentage of lending at over 90% loan-to-value has dropped significantly in the past 10 years, from 14.2% in 2007 to just 3.9% in 2017.


The FCA (Financial Conduct Authority) has also introduced stricter mortgage lending regulations across the market to ensure buyers will still afford repayments in the event of an interest rate hike. Thus meaning first-time buyers must raise ever bigger deposits in order to plug the gap between London house prices and average income.


Soaring deposits – The average first-time buyer deposit in London rose from £23,600 in 2007 to £100,400 this year, an eye-watering increase of 325 per cent in 10 years. By comparison, the income of the average first-time buyer has gone up just 27 per cent in that time, to £66,900.