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Britain's broken housing market

Written by Ipswich Building Society

26 Nov 2018


Bank of mum and dad, First time buyers, Gifted Deposit, Housing market

5 min read

It’s something you hear all the time in the news – housing shortage, housing crisis, rising rents and home ownership becoming a distant dream – not just for young people, but also a growing number of middle earners too.

But how bad is it really, and what can be done to fix Britain’s broken housing market?

How did we get here?

House prices in the UK have been increasing steadily – in August 2018 the average property price was £232,797 (2008: £185,782) with the biggest increases in and around London and the South East. In an era of relatively low wage growth and the increasing cost of living, many are struggling to squirrel away enough each month to even think about saving for a mortgage deposit and face being priced out of the housing market.

This bleak picture of home ownership among young people is primarily due to a chronic shortage of housing which has pushed up prices – research from Heriot-Watt University has estimated that England has a backlog of almost 4 million homes, meaning that some 340,000 new homes will be needed each year until 2031.

All power to the Bank of Mum and Dad!

According to research from the IFS, more than a third of 25 to 34 year olds can’t afford to buy even the cheapest homes in their area with a 10% deposit. Even more worryingly, home ownership is now said to be out of reach for most people without some form of help from the Bank of Mum and Dad – just 31% of 25-29 year olds now own their own home. It is such now that the Bank of Mum and Dad now ranks as the ninth-largest mortgage lender in the UK, last year gifting or lending more than £6.5bn to children to help them get on the property ladder.

In fact, some 44% of first time buyers have used the Bank of Mum and Dad or inherited wealth to enable them to buy a home.

What is being done about it?

Both main parties pledged in their respective 2017 election manifestos to increase housebuilding, and in the Autumn Budget last month the chancellor made another £500m available for the Housing Infrastructure Fund, a pot of money for local councils to dip into to help them build more homes. And with the abolition of Stamp Duty for first time buyers buying a home worth up to £300,000 and the announcement that it will also be abolished for shared ownership properties, there is some relief for potential buyers on the horizon – indeed, the number of first time buyers is at a record high. Despite this, of course, it remains the case that home ownership remains wholly out of reach for a significant proportion of people, particularly those living in more affluent parts of the country.

So, what help is there for those who still can’t get on the housing ladder?

Despite the facts and the forecasts, there is still hope out there for young people still wanting to get on the housing ladder. If you’re looking for a mortgage and have enlisted the Bank of Mum and Dad to help, we can accept applications made where the mortgage deposit is a gift from a close family member – available on all of our standard products if the if the gifted deposit is 10% or more of the purchase price.

And what’s more, we can even accept as little as a 5% deposit, as long as you have at least 12 months’ rental history.

For those that are not lucky enough to have the support of the Bank of Mum and Dad (or grandparents, uncles, aunties or step parents) there are a number of options available. One might be to consider a shared ownership mortgage, where you only purchase part of a property and pay a reduced rate of rent to a Housing Association on the remaining share, for example.

If you’re at your wits’ end, or need some friendly, no obligation fee-free advice, speak to one of our Mortgage Consultants who can talk you through your next steps.

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This article was published under our previous name of Ipswich Building Society. We changed our name in 2021 – find out more.

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