The ‘bank of Mum and Dad’ will lend over £6.5 billion in 2017, up from £5 billion in 2016, providing deposits for over 298,000 mortgages, and helping others to purchase homes worth £75 billion, according to a new report from Legal & General and economics consultancy Cebr.
The Bank of Mum and Dad is now on a par with the ninth largest mortgage lender in the UK and will be involved in 26% of all property transactions that take place in the UK market this year.
Nigel Wilson, CEO of Legal & General, said: “Bank of Mum and Dad continues to grow in importance in helping young people take their early steps onto the housing ladder. The intergenerational inequality that creates the demand for Bank of Mum and Dad funding continues to widen – younger people today don’t have the same opportunities that the baby-boomers had, including affordable housing, defined benefit pensions and free university education.
“Parents want to help their kids get on in life, and the Bank of Mum and Dad is a testament to their generosity, but it is also a symptom of our broken housing market.
“The UK is experiencing a supply-side crisis in housing – we are simply not building enough houses. We need to build more homes for the young, old and families alike – more quickly and cost effectively. Legal & General is playing our part by building and financing thousands of new homes. As well as providing much needed new properties, it will also deliver economic growth and new jobs.”
The research found that, in 2016, a third of prospective homeowners received financial help to buy from friends and family; in 2017 that figure rises to 42%.
Bank of Mum and Dad assistance has risen from an average of £17,500 in 2016 to £21,600 in 2017, an increase of 23%. Millennials are the biggest recipients of Bank of Mum and Dad funding – 79% of Bank of Mum and Dad funding goes to people under the age of 30.
In addition, the Bank of Mum and Dad will fund less purchases in 2017 than in 2016 (a -2.5% decrease from 305,900 to 298,300) – but only because overall housing market transaction volumes are down
76% of Bank of Mum and Dad assistance goes towards the deposit, with just 4% going solely on mortgage payments.
Parents in the South West of England are the most generous, providing £30,000 of financial support per transaction on average, even more than London (£29,400). Welsh parents give the least – £12,500.
Only 40% of parents provide equal financial support to their kids. 18% only help the eldest child buy a property, whereas 16% favoured the younger child. National house price differentials make little difference to the Bank of Mum and Dad’s criteria for extending support – most parents provide a fixed amount of financial help, regardless of where their kids choose to live – only one in five were prepared to provide more help for kids living in pricier areas. However, 39% of homeowners in London receive BoMaD help.
Wilson added: “This is the second year of our Bank of Mum and Dad research programme and the statistics show the problem is getting worse, not better. Transaction volumes are down in the housing market but BoMaD funding is growing exponentially. This is not a good thing, nor is it sustainable or equitable for our parents (the lenders) and young people (the borrowers). We need real action to fix the housing market and restore affordability for all.
“Institutions like Legal & General can regenerate not just residential housing, but the towns and cities in which the homes are built. Infrastructure, jobs and local economic growth are all key to creating thriving communities where people want to live.”
