It’s no secret that buying a property has become increasingly difficult for first time buyers and a specialist bank, Aldermore, has reiterated this in their First Time Buyers Index.
It confirmed that 23% of first time buyers are unable to get onto the housing ladder without help from the ‘Bank of Mum and Dad’, meaning that a lot of millennials have no option but to continue renting until they have saved up enough money for a deposit.
In fact, 26% of the sample said that the biggest obstacle faced by first time buyers is saving up enough money for a deposit, which comes as no surprise with low wage growth and the increase of renting costs. As a result of this, more and more young people are turning to their families to help them finance a deposit for a house.
Many parents are taking drastic measures to free up money to help their children. Some are choosing to use their savings and taking lump sums out of their pension to help their offspring with a deposit. While others are even going as far as remortgaging or downsizing their property.
Another route that young people are taking to save up for a deposit is to live with their parents to save on rent and bills. In the study, 23% of prospective buyers were taking this route, a figure that hasn’t changed in five years. However, this is also a pricey option for parents. In 2017, it was said that adult children living at home were costing their parents £4,996 a year for food, utilities and petrol.
The latest figures from Aldermore also suggest that 25% of the sample studied found that there weren’t enough suitable properties available within their price range – another reason why millennials are opting to rent or staying in their family home as a more viable option.
As well as the difficulties of finding the finances to buy a property, young people also see the benefits of renting through flexibility with short-term leases, as they may have to move around for work or choose to move in with a partner. Renting a property also means that they don’t have to deal with the costs of maintaining a property. If anything needs doing, they just have to get in touch with their landlord.
The mortgage director of Aldermore, Damian Thompson, said: “Young people have had a stark fall in home ownership over the past two decades, and with a challenging environment of high house prices, shortage of suitable homes and weak wage growth this trend isn’t likely to change any time soon. A typical new buyer now needs 18 years to save up for a deposit, a striking rise from three years back in the mid-90s, meaning the need for the Bank of Mum and Dad to provide support has increasingly become a necessity, rather than just a helping hand”.
If these figures provided by Aldermore are anything to go by, a vast number of millennials will continue to rent for a long time, making them a key market to consider when looking for a buy to let property.
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