Despite being labelled as the ‘bank of mum and dad' generation, 64% of first time buyers have a second source of income to help them save for a deposit, with this figure rising to 85% in London, according to a new survey* from Ipswich Building Society.
Starting a business is most popular ‘side hustle'
Of those prospective first time homeowners who disclosed a ‘side hustle', a third (32%) have started a business, half of which were related to their main job, and half starting a venture unrelated to their current employment.
Other common forms of side hustle include taking on informal work such as a bar job at weekends in addition to their main career (23%), or using skills from employed roles to earn extra money on the side (22%) i.e. a developer may design websites for friends and family after normal work hours.
Showing dedication to the cause, 66% of those surveyed are considering continuing the extra activity to help fund house renovations or furnishings once they have purchased a property.
Not only are a large number of first time buyers relying on this additional income stream, it is also making up a substantial portion of their deposit. The earnings from this extra work account for two fifths (39%) of a deposit on average. With a typical first time buyer deposit sitting at almost £59,000, that works out at £23,020 being generated from so-called ‘side hustles'.
Nearly two thirds (62%) of first time buyers doing extra work claim they would not have been able to save for a deposit without this extra income, while 63% believe it enabled them to purchase a property sooner.
Kevin Davis, Head of Direct Mortgages at Ipswich Building Society said: "There's been much discussion in recent years of the rise in gifted deposits, where parents and grandparents are keen to help their children get a foot on the property ladder, however that's simply not an option for everyone. This research highlights the fact that this generation are committed to helping themselves rather than solely relying on older family members for handouts.
"Running a business is not for the faint hearted and doing so alongside another job shows a commendable effort. We know that rising house prices are problematic for buyers who are trying to get on to the property ladder for the very first time but a silver lining will be if their efforts to save a deposit result in a new wave of entrepreneurs."
First time buyers, and anyone else with a side hustle for that matter, should also check with HMRC about what constitutes additional income and when this needs to be declared for tax purposes.
Kevin Davis warned about proof of income for mortgage affordability assessments: "During a mortgage application, if buyers wish for additional income from their side business to be used in the affordability assessment, and not just as a means to build up a deposit, they will need to demonstrate that this income is ongoing and should be prepared to provide tax returns as evidence."
The Society also cautioned that individuals may also need to ensure they are not breaching any contractual obligations with their main employer too, should they decide to start their own business whilst remaining in employment.
For further information visit the Ipswich Building Society
