This year, home buyers will receive £5 billion of help from families and friends, equivalent to the annual lending of a top-10 mortgage business, according to new analysis and research by Legal & General and the Centre for Economics & Business Research (Cebr).
The research shows that years of house price increases have significantly outpaced rises in wages, particularly since the financial crisis, making property less and less affordable. Home ownership is at its lowest levels in a generation, and things are only going to get worse. In 2015, the house price-to-income ratio was at its widest since the financial crisis. Cebr forecasts it will pass its 2007 peak within two years.
As prices rise, wages trail and affordability worsens in coming years, an increasing number of house buyers across the country will rely on friends and family to plug the gap. How long they can do so is open to question, the research says.
The pace of house price increases, threatens to stretch families finances to breaking point. In 2016, the average family contribution towards a loved one’s home is 37% of an average household’s net financial wealth, excluding property wealth. By 2035, the research predicts it will be more than half. For those buying in London, it already is, and the South East and East of England will follow soon.
There are opportunities for The Bank of Mum and Dad to expand. Releasing equity among the over 55s who already own their home is, at present, barely used. Only 3% in the survey had taken the opportunity, and another 3% said they were considering it. Even that represents a major source of wealth, though, which could help house 413,000 more families. Lifetime mortgages could be an ideal solution for many families looking to unlock their accumulated property wealth without having to move home. There might be opportunities in new solutions such as peer-to-peer lending, too, Cebr said.