Saving up a deposit is “the biggest barrier to buying a property”, Hargreaves Lansdown head of personal finance, Sarah Coles, has argued.
She said one solution would be parents putting aside a certain amount each month as a future deposit for their child.
Acknowledging the current home buying landscape, Coles said: “How is anyone supposed to get onto the property ladder when there are so many obstacles in the way?
“With mortgage hoops to jump through, and a mountain to climb when it comes to building a deposit, they’d need to be a ninja warrior to stretch to buying a first home - unless they have a significant leg-up.
Coles explained if renters bought today with a 10 per cent deposit, they’d have “no problem” paying the average mortgage.
“It wouldn’t be cheap, at an average of £1,208, however, it is less than they’re currently forking out for rent each month, which has reached £1,279,” she said.
Coles said ongoing high interest rates “aren’t the problem” restricting first-time buyers from getting in the property ladder.
“The problem standing in their way is the enormous deposit they need to raise before they get started,” she explained.
Coles pointed out that, according to recent statistics from the Office for National Statistics, a 10 per cent deposit costs £24,150, and the HL Savings & Resilience Barometer shows the average renter has just £79 left at the end of the month.
She said, as a result, many renters have either given up on their dreams of home ownership, lent on family members, or faced major lifestyle sacrifices.
To address this issue, Coles said parents should think about saving for deposits “far enough in advance” and “put their money to work as hard as possible”.
“The bank of mum and dad makes a huge difference to the next generation’s hopes of ever being able to afford to buy, and the good news is that they don’t need to find a lump sum in order to help,” Coles added.
“If they start when their child is born, they can put aside £142 a month, and at the age of 18, their offspring could have enough money to buy a property."
tom.dunstan@ft.com
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