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The first time buyer burden: Parents spend £20.1 billion a year supporting their adult children

POSTED: 28th June 2017
IN: Newsroom
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  • More than one in five (22%) aspiring first time buyers are currently living with their parents and a quarter (26%) say they will have to live with their family for five or more years to save for a deposit
  • This has increased parents’ outgoings by an average of £4,996 a year in food, electricity and petrol
  • As a result of these extra outgoings, a third (33%) of parents have had to sacrifice saving for retirement
  • A quarter (25%) of first time buyers want the new government to address rising house prices, while one in six (14%) are keen for the Help to Buy scheme to be relaunched
  • Raising a deposit remains the biggest obstacle for first time buyers with more than one in five (22%) hoping to borrow from their parents or family

First Time Buyer Index Q2 17

The latest quarterly First Time Buyer Index 1, published by Aldermore, the specialist bank, reveals that more than one in five (22%) aspiring first time buyers are currently living with their parents. Of those, a quarter (26%) say they will have to live with their family for five or more years to save for a deposit, whilst one in ten (10%) expect to live with their family for three to four years. This situation is unlikely to get better as almost a third (31%) strongly agree that buying a home is unachievable for them at the moment (a sentiment which is consistent quarter on quarter).

Failure to launch

The report reveals that first time buyers living at home will cost parents an average of £416 extra a month on food and drink, petrol and electricity bills, equating to £4,9962 a year. For those parents whose children have to live with them for five years, it would cost around £24,9793 extra over the period, while for those who find themselves at home for three years, it could cost their parents around £14,9884. This means that parents are having to pay an estimated total of £20.1 billion5 across the country each year to help their children get on the ladder. This massive spend has meant that more than one in three (33%) parents have had to sacrifice saving for their retirement to cover the additional costs.

Eating them out of house and home

When it comes to living expenses, almost two thirds (63%) of parents with children living at home (aspiring to get on the property ladder) have seen an increase in their monthly food and drink bills, at an average of £99 per month. A further 47% have seen electricity bills increase by an average of £95 per month. 

Outgoings

% of parents who have experienced an increase in their monthly outgoings

Food and drink bills

63%

Electricity bills

47%

Funding their children’s lifestyle

42%

Petrol bills

36%

Car insurance

30%


Emotional impact

Not only is this impacting heavily on parents’ finances (42%), it’s also taking its toll emotionally and psychologically. With their child living at home, nearly one in three (31%) feel like they don’t have the freedom they could have, whilst a further third (31%) believe the situation is negatively impacting the relationship with their child. Furthermore, a third (33%) believe it is negatively impacting the relationship with their partner and over a quarter (28%) are waiting impatiently for their child to move out.

It is also having a negative impact on the Boomerang Generation itself with almost a quarter (24%) of aspiring first time buyers saying that still living with their parents makes them feel like a child. One in six (17%) feel like they are a burden to their family and friends, while a quarter (25%) feel frustrated but recognise it’s a means to an end in order to buy their own home (24%).  

How can the new Government help?

It is clear that there is a serious problem when it comes to taking the first step on the property ladder. When asked what the new Government should do to better support first time buyers, a quarter of respondents (25%) say it should address rising house prices, and this figure increases to almost a third (31%) in London. One in ten (10%) say that building more homes is the priority. Around one in six (14%) are keen for the government to relaunch the Help to Buy scheme as a priority, and more than one in ten (12%) say bank and building society lending criteria should be adapted to better help first time buyers.

Actually getting on the housing ladder

The research found that more than nine out of every ten (91%) of those hoping to buy their first home think it is difficult to get on the property ladder (compared to 94% in the previous quarter).  Raising a deposit continues to be the biggest obstacle faced by first time buyers, with 35% believing this is a bigger hurdle than rising property prices (26%).  Although two in five (41%) Londoners believe property prices will prevent them getting on the ladder.  More than one in five (22%) prospective first time buyers are planning to use parental or family assistance for their deposit, this rises to 27% in London.  The number planning to use their own savings to fund their deposit has risen to 23%, compared to 18% in the previous quarter6.

Charles McDowell, Aldermore’s Commercial Director, Mortgages, says: “First time buyers have a notoriously difficult time getting on the property ladder.  Since saving an adequate deposit remains the biggest obstacle, more and more people have had to move back into the family home to boost their savings. Our report reveals just how difficult this can be to navigate, with real impact not just on parents finances but also on the relationship with their children and their own ability to save. Furthermore, as parents are less able to save for their retirement, more people will require help to unlock the value held within their property in later life. This is an intergenerational problem that goes beyond the simple view of the Bank of Mum and Dad.

“We believe strongly that first time buyers are the driving force of the property market but our Index reveals just how hard buying a first home really is and is likely to remain so for the foreseeable future. Low levels of confidence amongst this group will have ramifications further up the housing chain so it’s imperative that more support is offered.  We know that first time buyers are relying on the new government to provide much needed solutions but following the recent General Election, housing policy is likely to be reviewed again under the newly appointed housing minister, meaning it remains more uncertain than ever. 

“Aldermore offers many products to help first time buyers who are struggling to gather a deposit, including the family guarantee mortgage and 95% mortgages for customers who have a smaller deposit. Customers should always speak to qualified adviser who can ensure they find the best mortgage product for their needs.”

*Ends* 

For further information, journalists can contact:

 

Rachael Snelling, Aldermore
Phone:          0208 1853 102
Email:           Rachael.Snelling@aldermore.co.uk

Rozie Green, Lansons
Phone:          0207 566 9724
Email:            rozieg@lansons.com

Notes to Editors:

Aldermore

1Research conducted by Opinium Research between 18 to 24 May 2017 amongst 1,502 potential FTBs and between 19th and 20th June 2017 amongst 153 parents with children who are potential FTBs (i.e. over 18, living at home but who plan to buy a property within the next 10 years).

2Cost averages are based on asking those with children living at home who are aged 18+ and plan to buy a property within the next 10 years how much their monthly outgoings have increased in a range of areas (e.g. electricity bills, insurance).

The median averages of these increases were combined to give £1,140 and then multiplied by the average percentage who said that their outgoings had increased in each category. The average was 37%. The sum of the median averages of £1,140 multiplied by 37% which gives us a monthly average of £416 across all parents of potential FTBs. Multiplied by 12, this gives us an annual average increase of £4,996.

3 The estimated cost of an adult child staying at home for 5 years is based on multiplying the annual average increase of £4,996 by 5 to give us £24,979. 

4 The estimated cost of an adult child staying at home for 3 years is based on multiplying the annual average increase of £4,996 by 3 to give us £14,988. These averages assume that the cost will not change year-on-year.

5 There are approximately 4,020,000 people in the UK who have adult children who live at home who say that their child / children plan to buy a home within the next 10 years. This is based on 153 out of 1,954 respondents on a nationally representative survey, equating to 7.8%. 7.8% of the UK adult population of 51,339,000 is 4,019,891.

The average annual increase in outgoings (£4,996) multiplied by the number of people affected (4,019,891) gives us an estimated annual cost of £20,082,861,285.

6 Aldermore’s Q1 2017 First Time Buyer Index research was conducted by Opinium Research between 21 to 26 February 2017 amongst 502 actual FTBs.

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 For further information about Aldermore, please review our Notes to Editors page

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