House prices to force extra 1m young people to live with parents

A million more young people could have to live with their parents over the next decade to save enough for a deposit to buy their own home.

The insurance company Aviva has estimated that 3.8 million people aged between 21 and 34 could be living in the family home by 2025, up from 2.8 million in 2015.

Rising house prices were making it increasingly difficult for young people to get on to the property ladder, Aviva said, after average UK house prices had risen more than 50% to £279,000 between 2005 and 2015.

As well as having to provide a home for longer for their children, parents are also helping fund deposits.

The “bank of mum and dad” will help finance a quarter of all UK mortgage deals in 2016, with an average contribution of £17,500, according to a Legal & General report earlier this month.

Parents will stump up a total of £5bn to help their offspring buy a house this year, L&G estimated.

In the 10 years to 2015, the number of young people living with their parents increased by almost 700,000, or 32%, transforming the makeup of UK households by making multigenerational living much more common.

Lindsey Rix from Aviva, said: “Multigenerational living is often seen as a necessity rather than a choice, particularly when adults are forced to move back in with family to help save for long-term goals like buying their own house.

“But rather than being an inconvenience, our report shows it is often a positive experience, with shared living costs reducing financial strain and the added benefit of constant company.”

When young people were asked by Aviva about what might prompt them to remain with their parents or move back in for six months or more, saving for a house deposit was the second most common reason given, at 57%. The most common answer was caring for an unwell relative, at 71%.

About 42% of adults said living in a multigenerational household would be a positive arrangement, rising to 66% among those already living this way.

Respondents to the Aviva survey said having other people around for company, shared living costs and more people with whom to share chores were among the benefits.

About 12% of people living in a multigenerational household said the disadvantages outweighed the benefits, compared with 21% of all UK adults.

Rising rents have put pressure on young people who want to buy a home, accounting for more of their pay and making it harder to save a deposit. Although 95% mortgages have made a comeback, in parts of the country where prices are high, buyers need large deposits so they can pass lenders’ affordability checks for mortgages.

Figures published on Friday by the Office for National Statistics showed that rents across Great Britain rose by an average of 2.6% in the 12 months to April, with tenants in London seeing the biggest jump in prices. The ONS’s private rental index showed tenants were paying more in all parts of the country, with rents up 2.8% in England, 0.2% in Wales and 0.5% in Scotland. In London, rents were up 3.7% over the year.

The thinktank the Resolution Foundation said the ONS’s figures showed the cost of renting in London had increased by a fifth over the last five years while pay had flatlined. Lindsay Judge, senior research and policy analyst at the Resolution Foundation, said: “This is bad news for living standards, bad news for employers and bad news for the wider economy.

“Getting to grips with the affordability crunch facing private renters in London is a tough task that the new mayor will need to take on.”