The number of U.K. first-time homebuyers who step on to the housing ladder mortgage-free has tripled since the financial crisis, largely thanks to wealthy parents paying the entire cost of a home.
Some 19,000 people bought their first homes outright in the past year, according to research by Hamptons, the estate agent, illustrating the growing reliance on outside help in enabling people to become homeowners.
Here in Canada, many new homebuyers are looking to mom and dad for help when buying that first home – but it is a percentage of help, not an outright purchase.
A recent report from the Bank of Montreal shows 42% of first-time buyers expect help from family – up from 12% in 2014.
Without that help, a whopping 40% said they would not be able to buy a home, which reflects what broker/owner Joy Pike of VERICO Mega Mortgage Inc. in Mississauga, Ont. has seen, as people continue to struggle to pay down personal debt.
“I’m still seeing a fair number of people with debt, and using their equity to pay down debt,” Pike told MBN. “It’s sad – people get into a perpetual cycle of debt.
Like here in Canada’s major urban centres, the rise in the U.K. has taken place against a backdrop of rapid house price inflation: the price of the average home bought by a first-time buyer rose 20% to £128,225 ($261,368) in the four years to October, according to LSL data. High ratios of prices to average earnings and tighter mortgage criteria have made home ownership unaffordable for many, pushing up the age at which people first buy a property.
“It is a combination of wealthier families being able to help out their kids and house prices increasing so rapidly,” said Fionnuala Earley, research director at Hamptons International, told the Financial Times
One-fifth of those buying outright in the past year were able to do so because of an inheritance, while two-thirds received help from parents, but 14% of cash buyers had saved enough themselves to buy without a mortgage.
First-timers paying in cash were also able to buy more expensive homes than others: the average buyer spent £10,000 ($20,383), or 5%, more than mortgaged first-timers, while in London the figure was £81,000 ($165,106), or 25% more.