Over the last year, almost 20,000 first time buyers bought their property outright, with a lot of it being put down to those people getting external financial help from their parents.
According to these latest figures, 6.3% of all first time buyers in the country are going without mortgages, with the percentage going up to 7.5 in London. The homes that cash buyers are buying are, on average, 5% more expensive than those bought with mortgages. In London, this goes up to 25%, equivalent to an extra spend of £81,000.
Among those taking out mortgages to buy their first home, just over 5% had enough money to put up a deposit that allowed them to get mortgages worth 20% or less of the value of the property they were purchasing.
Fionnuala Earley at Hamptons International, who released these figures, put these latest developments down to “a combination of wealthier families being able to help out their kids and house prices increasing so rapidly”. That latter most likely referring to something of a hurry to purchase properties before prices go up even further.
“Parents funding homes for their student offspring used to be the typical group of cash first time buyers” Early went on, “but tighter lending criteria and stretched affordability have expanded this group, and the ëbank of Mum and Dad ‘ has taken the place of the traditional mortgage lender for a growing number of buyers.”
Interestingly, the rate at which first time buyers are purchasing without mortgages has gone up at the same time as house prices have. The cost of a first property is estimated to be around 20% higher than it was four years ago, with the average now sitting at a little over £128,000. Further, the chasm between wages and house prices has been growing at the same time, with the ratio now sitting at around 5.3:1.
And during this same time, home ownership rates have been falling, presumably as a direct result of prices going up, combined with the ever increasing numbers of private landlords snapping up desirable properties.
Home ownership has fallen by close to 10% over the last 12 years and the proportion of 25 to 34 year olds who own the home they live in has dropped to 36%, the lowest it ‘s been since 1986.
George Osborne ‘s recently implemented changes to the housing market are, for the most part, all geared towards moderating the rate at which prices go up, and improving the level of home ownership across the country.
This has included bumping stamp duty up by 3% on buy-let properties, and extending the Help to Buy scheme in London, offering loans to potential home owners worth p to 40% of the property they wish to buy
Earley believes that this London Help to Buy scheme is likely to push the balance back in favour of first-time buyers using mortgages as the years go on.