UK lending continues to increase thanks to ‘bank of mum and dad’
Lending has continued to increase year on year, but closer scrutiny reveals that this rise may not be the result of a stronger market.
New data released by the trade association UK Finance has shown that there was an 13% increase in lending during April compared to the year before.
Whilst this may appear to be good news initially, the data also suggests that the main reason for this increase was due to those who already own re-mortgaging – rather than a huge rise in the number of new mortgage applicants.
Similar research from Legal & General has shown that the while there was indeed an 11% rise in approved new mortgages across the market, this is the result of first time buyers borrowing money from their parents to help them afford the deposit.
Last year, 25% of all new mortgage applications were approved thanks to money lent by friends and family, and that number has increased to 27% this year. And if trends are to continue in the current fashion, this figure could rise to as much as 30% in the next 12 months.
Experts have also been quick to point out that the rise in the number of mortgage applications could also be the result of a widely held belief that the Bank of England are expected to raise interest rates by the end of the year.
For younger people looking to buy a home for the first time, it appears that unless they are able to borrow money from friends and family, they will be extremely limited in regard to purchase location. In Scotland, lower sold house prices have meant that most new purchases take place without parental help – but in London, where property prices are highest, over half of all property transactions are thanks to the ‘bank of mum and dad’.
For the housing market as a whole, the need for parental aid from first-time buyers sets a worrying precedent, and as wage levels continue to stagnate, there will in all likelihood, come a time when the well runs dry, and the industry could grind to a halt.
Homeowners who wish to sell their house fast should also be concerned, as a large number of prospective buyers appear to be unable to afford a home on their own. And if they are unable to borrow money from friends or family, vendors will find themselves having to reduce their asking prices or else risk a longer stay on the market.
Can’t find a buyer? Why not ask National Homebuyers for advice, as we buy any house. Call 08000 443 911 or request a call back to find out how much you could get for your property.