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May 5, 2016updated 04 Aug 2023 8:56am

Even a 0% deposit mortgage won’t end buyers' reliance on the bank of mum and dad

By Barbara Speed

It can sometimes seem like there’s nothing new to say about the UK rental market, especially if you’re living in it. Bathrooms remain unfixed, carpets unreplaced. Boomers own, while millennials rent. Said rents swell with an inevitability which has practically ceased to be newsworthy. 

But a press release out this week has highlighted something which, when you think about it, should have been obvious the whole time: the divisions in our broken housing market could be as much class-based as generational. In fact, class (which increasingly means “family money”, as opposed to the Lord and Lady such-and-such) may be the biggest factor in whether you’ve managed to escape the rental market or not. 

Legal & General, a financial services company, has collected data showing that money from parents will be used to help finance a quarter of all UK mortgage transactions this year. The average contribution from good old mum and dad amounts to £17,500 – equivalent to a 5 per cent deposit on a £350,000 home or flat, and 7 per cent of the current average purchase price. 

This phenomenon is rarely spoken about, perhaps because it snips a hole in the dominant, generational narrative around renting. Yet it’s undeniably true. People in their twenties and early thirties tend to fall neatly into one of three groups: they work in the City and, by saving every possible penny, plan to eventually buy; they’re resigned to renting forever; or they’ll one day own with the help of their parents. 

The underlying reality of this fact, though, is that for many living in London in particular, our ability to own a home lies outside our control. On the average London salary of £27,000 a year, there is almost no point saving for an average London flat or home. Property, whether it’s a family home or money transferred from one home to another through the generations, has become the new birthright.

As such, we essentially have a new landowner class, shadowed by a secondary class of those who would need to accrue wealth over more than a single lifetime in order to buy. That landed class have access to the most valuable asset going, and are more likely to be able to buy further properties over time. Buy one extra house, and you can live off its rent. That’s the definition of a landed gentry – a class that we might have thought would soon disappear, rather than grow in ranks.  

In the face of this brutal fact, a white knight has ridden forward in the form of Barclay’s new mortgage scheme, which requires no deposit at all. Many young renters, especially those in couples, may be able to just about afford mortgage repayments – especially as rents have, in many areas, caught up with them anyway – but can’t scrape together the money for a deposit. Remove the need for a deposit, and perhaps we could even the playing field a little.

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Unfortunately, inevitably, of course: it’s not that simple. When you read the fine print, it turns out that this is an extension of a previous Barclays deal which asked for a 5 per cent deposit, plus 10 per cent of the house purchase price in a savings account linked by the mortgage. This savings amount, the Press Association notes, was usually put up by the buyer’s parents – as was, in many cases, the deposit itself. 

Now, Barclays is removing the 5 per cent deposit altogether, which is all well and good – but you still need to put 10 per cent of the purchase price in a linked savings account, which can then be withdrawn three years later. Bully for you. Bully for your parents, who can just move that £30,000 or £40,000 they had lying around into a savings account for a few years and accrue interest (as long as you keep up with your mortgage payments). Not so bully for those without parents with that kind of money. 

It’s easy to disagree about how best to encourage aspiration and what each individual is “entitled” to as a British citizen. However, I have a feeling that whatever your political beliefs, you’d agree that it should at least be possible to achieve an education, job, and home in the UK over the course of a single lifetime, whatever your background or parentage. 

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