22-05-2025
The rise of mortgage-free young homeowners
There's a growing gap between Britain's homeowning haves and have-nots: whether you are tied to a mortgage.
Many people work towards being mortgage-free over decades, but increasing numbers of young people are choosing cheaper properties they can own outright over borrowing their way to a bigger home.
Around 37pc of households own their property outright – up 4pc over the past decade – compared to the 28pc paying off a monthly mortgage, according to the Department for Work and Pensions.
Between favourable mortgage rates during Covid and the 'great wealth transfer' (the passing of trillions from baby boomers to their Gen X or millennial children), the number of those who can lay total claim to their property is on the up.
It's surprising, perhaps, given that 20- and 30-somethings are well behind prior generations when it comes to home ownership, with the average age of those first getting their foot on the property ladder rising to the age of 33.
But the Bank of Mum and Dad is proving to be a saviour. Half of all first-time purchases last year were secured via parental cash, amounting to some £9.6bn, according to recent figures from Savills.
Jo Eccles, founder of prime central London buying agency Eccord, says that the Bank of Mum and Dad now accounts for almost a third of all homes under £5m that her firm sells.
'Upcoming changes to the way pensions are taxed are prompting parents to gift much larger sums to children and grandchildren for property purchases – often buying the property outright rather than just gifting a deposit, like they used to,' she explains.
'Shifting regulations mean that parents are keen to pass on significant family wealth early.'
Of a string of recent sales they have managed, she says that 'in every case, the parents themselves were only in their 60s or early 70s, giving themselves a good chance of beating the seven-year rule'.
This is where no inheritance tax is payable on gifts if the donor lives for seven years after passing them on.
Among the grateful recipients is Ruby Ennis*. The 21-year-old is soon to move into a £435,000 one-bed flat in Fulham, south-west London.
Due to the commission-based structure of her income from her job in property, she had a salary too low to get a mortgage by herself. When she raised the issue with her family, her father and grandfather duly stepped in, paying for the property outright between them in what was 'basically an early inheritance', she says.
Their generosity means Ennis – who has been living for free with her family in London – is 12 years younger than the average UK homebuyer, and has no mortgage to repay. She had never discussed the idea of being gifted a large sum by her family beforehand – let alone for a property.
In her mind, 'it was always a back-up option, though it wasn't ideal'. However, her family was quickly on board: 'I told them about the opportunity and they were very happy to help out.'
Part of the reason is that they, like her, share the view that 'renting is absolutely ridiculous,' Ennis says. 'If you can buy a property, then why would you want to rent? I think it's just putting money completely down the drain.'
The cost of renting in England has risen by 9pc over the past year, according to the Office for National Statistics (ONS).
'It's unreasonable to think someone in their 20s could buy a home'
Nathan Xu had a similar conversation with his own parents. In a bid to combat ever-rising rental prices in London, which last month hit a monthly average of £2,243, per the ONS, the 27-year-old solutions engineer 'asked for their advice, and we figured out that if we purchased a flat rather than renting a room, that would help me to save a lot of money'.
Last February, he completed on a £450,000 new-build flat at Berkeley's Heron Wharf in Poplar, east London, overlooking the River Lea. He decided against purchasing where he had been living in Elephant and Castle, in the south of the city, as 'during night time, there was a lot of noise – ambulances and people screaming on the street'.
He bought off-plan, helping to reduce costs since these properties are typically offered below purchase price as developers look to secure capital.
The amenities in his complex – a lounge, gym and club – as well as the neat décor, were among the selling points of a home he plans to stay in for the next five years. For those who can, he says, 'it's a wise decision to get a flat, rather than rent'.
While mortgages are still for most considered a given, Sonya Matharu-Coxill, who runs the Mortgage Atelier, says that among those seeking out their first home, there has been 'a quiet evolution in buyer mindset. We're witnessing a generational reset in how people think about debt and homeownership', she believes.
She adds: 'These buyers have grown up through multiple financial shocks, from the 2008 crisis to the pandemic and now the cost of living crisis, so their relationship with borrowing is more cautious, even if they're financially capable.'
During the period of ultra-low interest rates, borrowing to the max had clear appeal.
But 'there's been a huge psychological shift, especially after many homeowners found themselves unprepared for the sharp rise in rates when their fixed terms ended. That sudden jump in monthly payments came as a real shock, and it's left a lasting impression', she says.
This includes younger buyers looking to enter the property market for the first time. 'They're building in buffers, prioritising resilience, and focusing on long-term flexibility rather than maxing out what they can borrow.'
Eccles adds that, with prenups and cohabitation agreements far more socially acceptable than before, these are typically now put in place 'to protect the money if the child's relationship breaks down. As a result, parents feel more comfortable making a substantial gift while the child is only in their 20s or 30s.'
For Ennis, the next few years of homeownership are set – she plans to 'put a lot of love' into her new place, and then resell in a couple of years, at what she hopes will be profit enough to shimmy her further up the property ladder.
Among her friends, who mostly live at home rent-free, discussions are already being had about how their parents might contribute to future purchases.
Is it realistic that any 20- or 30-somethings can afford to buy without a generous donation from the parental coffers?
'No, not at all… it's super, super rare from someone just working in their 20s that they're going to be able to buy something without a massive mortgage, without help from mum and dad,' she says.
'It's unreasonable to think you'd be able to get on the property in your 20s without help from family.'
