Are you stuck in the parent rent trap?

Half of babies born in the UK, around 365,000 babies every year, are now born into rented accommodation rather than properties owned by their parents. For the first time in nearly six decades, a child is at least as likely to be born into a rented home as a home owned by its parents, a report by insurer Royal London found. There are now more than 1.5m families in England with dependent children living in rented accommodation. Across the UK as a whole, the number of families with dependent children living in private rented accommodation has risen by 94% in the last decade, up from 940,000 in 2006/7 to 1.8m in 2016/17. Out of a total 4.5m households which are currently paying rent in the UK, around one in three have dependent children.Why so many babies are born into rental accommodationLow interest rates and a loosening in monetary policy have helped to push up house prices in many parts of the UK, benefiting those who already own a home, but making it much tougher for those trying to get onto the property ladder. Steep house prices mean that many people need to save for a deposit for several years, which has pushed up the average age of a first-time buyer to 34. In 1997, the average age of a first-time buyer was just 26. The average ages of a first-time mum and dad are 29 and 33 respectively, meaning that many will become parents whilst saving to buy a property. Having children can make it much more difficult to squirrel money away, particularly as rents are now around 25% higher than mortgage costs. The cost of childcare can also affect the amount buyers are able to borrow, as mortgage affordability tests imposed by lenders will take these into consideration. More than one in four couples (28%) in the 35-44 age bracket were renting privately in 2017/18, the report found, up from one in ten (13%) in 2007. This demonstrates how it’s become increasingly difficult for couples past the age at which they’re likely to have had one or two children to get out of renting and buy their own homes.Boost your chances of getting onto the property ladderIf you’re struggling to save up a deposit to buy your first home, there are government schemes such as the Help to Buy ISA or Lifetime ISA, which can help give your savings a boost. With both these accounts, provided you stick to certain contribution limits, the government will top up any payments you make by 25%. However, you can only use the bonus from one to buy your first home. You must be aged under 40 to open a Lifetime ISA, but there’s no upper age limit for the Help to Buy ISA. Many people rely on support from the Bank of Mum and Dad to help them get onto the property ladder. This doesn’t necessarily have to mean parents handing over a big lump sum, as there are a number of mortgages available where family members can help without giving away their savings. For example, Barclays Family Springboard mortgage enables homebuyers to take out a mortgage without putting down a deposit, as long as their parents agree to keep 10% of the property purchase price in a savings account for three years. These savings will be returned to them after this time provided all mortgage payments have been made on time. Nationwide Building Society, Family Building Society and Aldermore, amongst others, also offer mortgages which allow parents to provide financial support in a range of different ways. If you don’t have family to help, buying with friends could be worth considering, although of course this option is likely to be more suitable for those without dependents living with them. Benefit from low mortgage ratesBrexit uncertainty is failing to deter first-time buyers, with low mortgage rates helping to boost numbers to a 12-year high in 2018, according to UK Finance. If you are able to pull together a deposit, monthly mortgage payments will often be considerably cheaper than renting. Lenders are particularly busy competing for those with smaller deposits of 5% of the property value or above, which means there are plenty of deals available for both first-time and next time buyers. Bear in mind however, that the bigger the deposit you’re able to put down, the wider the choice of mortgage deals you’ll have available to you at competitive rates.