A new report written and researched by the Centre for Economics and Business Research on behalf of HSBC, reveals that the ‘bank of mum and dad' has helped to finance over 100,000 first time buyer borrowers between 2008 and 2011.
This ‘family financing' from the bank of mum and dad has also made a significant contribution to the first-time buyer market during this period, enabling approximately £23bn worth of first-time buyer purchases, or £5.6bn a year.
Between 2008 and 2011, the total value of first-time buyer transactions in the UK fell from £30.2bn to £28.5bn per year as economic turbulence suppressed mortgage lending.
As a result, many first-time buyers turned to their families for financial help in order to fill this funding gap. In the last year alone, £5.3bn, or 18.7%, of all first-time buyer transactions would never have taken place without family financing, according to the HSBC/Cebr report's estimates.
Peter Dockar, head of mortgages at HSBC, said: "It's obvious that the ‘bank of mum and dad' has stepped in to plug the gap left by those banks and building societies who have constricted their lending in recent years, which means that family support has become an important element of the post-crisis financing mix.
"However at HSBC we have remained open for business and will continue to support first-time buyers so that they have the opportunity to become homeowners in their own right.
"This year alone we have committed to lending at least £4bn to first-time buyers, more than we ever have before, to help them onto the property ladder with or without family financing. We will continue to offer market-leading products for those with a smaller deposit."
First-time buyers agree that tough mortgage market conditions have prompted them to ask for help from their families. Approximately 85% of survey responses for those first-time buyers who secured family financing indicated that they turned to it because it was less risky, cheaper and was less stressful than some traditional mortgages. Only 15% of responses indicated first-time buyer's main motivation was to buy a more desirable home in a better location.
The HSBC/Cebr report also considers how family financing's contribution to the first-time buyer market is likely to change between 2012 and 2017.
It predicts only 11.0% of first-time buyer transaction values will rely on family financing by 2017, compared with 18.7% in 2011.
Despite this decline, family financing will still remain a hugely important contributor to the first-time buyer market even in 2017. That year, £5.1bn worth of first-time buyer purchases is likely to be impossible without family financing - roughly the same amount as in 2011.
Daniel Solomon, Cebr economist and chief author of the report, said: "Mortgage lending to British first-time buyers fell off a cliff during the financial crisis. To some extent, families have moved in to fill the gap - providing gifts and loans to their first-time buyer relatives. Families' contributions have been invaluable, helping thousands to get on to the housing ladder who would have missed out otherwise.
"Families have really stepped up to the plate - supporting relatives who want to buy their first home. Now that so many first-time buyers are having difficulty getting the mortgages they would like, gifts and loans from families have become crucial to their financing mix."
