Parents underestimating how hard it is for children to buy their first home

Otmane El Rhazi from Mindful Money » Shares.

The parents of ‘Generation Rent’ are underestimating just how hard it is for their children to take their first step on the property ladder.

The Generation Rent report by Halifax shows there is a wide disconnect between prospective first-time buyers and their parents when it comes to their perception of the first-time buyer market.

Just 12% of parents believe it is ‘virtually impossible’ for first-time buyers to get a mortgage, this rises to 21% of prospective first-time buyers.

However, both parents and their renter children were more pessimistic about the opportunities for buying property in 2012 when 21% of parents and 29% of prospective first-time buyers said it was virtually impossible.

Despite the growing optimism around purchasing a property more wannabe first-time buyers are moving back in with their parents, with 28% doing so this year compared to 24% in 2012.

The number of people who receive help to buy a home from their parents has remained steady with most parents choosing to help towards a deposit. In 2015, 22% of parents helped their children on to the property ladder, compared to 27% last year.

Another 17% contributed towards the cost of moving this year, 5% were guarantors on the mortgage, 6% contribute to the monthly mortgage payments and another 5% bought a property with their child.

Parents who owned their own home were far more likely to help children with a deposit. A total of 57% of parents who own a property contributed or planned to contribute to their child’s deposit, compared to 24% of parents who rent.

Craig McKinlay, mortgage director at Halifax, said: “The Generation Rent report shows a clear divide between parents and their children as regards optimism over getting on the housing ladder.

“In reality there are more mortgages available which require a 5% deposit and first-time buyer numbers are increasing. But whether it is giving their children a cash lump sum or providing a roof over their heads while they save, it is clear the bank or mum and dad will have a role to play in helping their children get on the property ladder fort he foreseeable future.”