Homebuyers are increasingly in need of financial support from family and friends to purchase property since the coronavirus pandemic hit, according to research from Legal and General.
Family and other financial support will be involved in around 23 per cent of transactions this year, up from 19 per cent last year, illustrating the level of strain in the current market.
Of those who’ve bought recently and received support from family and friends, 65 per cent said it would have been ‘unlikely’ without help.
One in five said they would have had to delay their purchase by more than five years. A further 14 per cent said they never would have been able to buy without the help of family or friends.
Stamp duty cut not helping
The stamp duty holiday in England appears to have had little success for stretched buyers, with just eight per cent of would-be purchasers saying they would rely less on family or friends as a result of government intervention.
And only 12 per cent have brought forward their plans to buy since the start of the pandemic.
Indeed, a third of those likely to buy a house in the next five years said that this will be done using money from family and friends.
The research also highlighted that prospective buyers were being penalised as choice in high loan-to-value (LTV) mortgages becomes more restricted.
Inheritance reliance growing
Intergenerational support in the form of inheritance is becoming more common with 27 per cent of gifters using inherited funds to help their children or grandchildren to buy a property.
However, cash remains the most common way of offering help with 39 per cent of gifts coming from using cash savings to provide financial assistance.
As a result of the pandemic and closure of the housing market earlier this year just £3.5bn is expected to be given by family and friends in 2020, almost half the £6.3bn in 2019, and it will also fund 85,000 fewer home purchases.
Nigel Wilson, chief executive at Legal & General noted that for years buyers have been faced with a limited supply of affordable homes, a challenge which is now being compounded by Covid-19.
“Not only are buyers facing an uncertain economic future, but changes by lenders in the wake of the pandemic have restricted the low-deposit mortgage options on which many young people rely to make their first step,” he said.
“While the Bank of Mum and Dad is leaning in to help those lucky enough to have its backing, a generation of hopeful buyers without the support of families could find themselves locked out of the housing market.”
Owain Thomas is features and contributing editor of Mortgage Solutions and editor of Specialist Lending Solutions.
He also has experience in the protection, pensions, workplace benefits and HR areas.
Owain has won two Headline Money Awards and the Protection Review’s Journalist of the Year award.