Who is really funding first time buyers purchasing property in Rotherham? It’s The Bank of Mum and Dad of course.
I have recently been studying the figures for the last quarter where 692 Rotherham properties were purchased by first time buyers. With wages rising at 2.8%, unemployment at a low rate of 4.2% (down from 4.6% from a year earlier and the joint lowest since 1975), national GDP rising at 1.87% and inflation at 2.3%, there has been a great opportunity for first time buyers to get their foot on the first rung of the Rotherham property ladder. Indifferent house price growth (compared to a few years ago) has certainly helped.
How much are first time buyers paying and borrowing?
Over the last year, the average purchase price of a Rotherham first time buyer property has been £80,200. The average deposit paid was £12,992 yet my calculations show that the average Rotherham parents are contributing about £5,684 – nearly 44% of the total deposit!
The Rotherham brand of The Bank of Mum and Dad is for many young adults perceived to be the only way they will ever be able to afford their first home. In fact, parents in our area have contributed a substantial £3.93m in the last 12 months to ensure that their nearest and dearest offspring manage to get onto the property ladder. This assistance towards the deposit makes a huge difference, enabling youngsters who thought they couldn’t get on the housing ladder more able to do so.
There’s little being done to address the real problems with the housing market
With mortgage rates at all-time lows, few people would struggle to make mortgage repayments, but it is the requirement of the deposit which is usually the issue. With parents (and sometimes grandparents) helping out where they can, this does little to address the real problems of the housing market – for both people buying their first home and renters!
In our country the oldest generation control the biggest share of the nation’s welfare – we have been fortunate that they have been so generous to those following them. We must remember, however, that this generosity is a sign of the issues of the British housing shortage – not it’s solution.
The return of 95% mortgages mean there are options for first time buyers
You may have noticed that I used the word “perceived” earlier in the article – young adults borrowing from their parents is perceived to be only way they can afford their first home. This was intentional. Yes, the average first time buyer deposit is 16.1% but that is an average. Since late 2009 there have been 95% mortgages available for first time buyers. In addition, lenders like Barclays and many local building societies offer 100% mortgages (with no deposit!) at 2.75% fixed for three years.
The perception is you need 15%, 20% or even a 25% deposit to be a first-time buyer… this is simply not true!
However, there is a changing perception when it comes to renting.
Renting is no longer seen as the poor man’s choice, as many young (and increasing older) people are becoming more at ease and comfortable with the flexibility offered by private renting a property rather than jumping ‘lemming like’ into home ownership. Rotherham landlords will continue to see growth in sector, and like Germany, today’s renters will become homeowners in the future – when they will inherit the wealth of their parent’s home.
Interesting times are ahead – please get in touch if I can help you with anything to do with the property market. Whether you’re a prospective first time buyer or a landlord – I’m happy to help!