New research published on Tuesday by the Centre for Economics and Business Research (Cebr) and FTSE100 financial services group Legal & General shows that the Bank of Mum and Dad will lend over GBP5bn this year, to enable their children to buy homes or move up the property ladder.
The Bank of Mum and Dad, which comprises parents, grandparents, other family members and friends, will help out with 25% of all UK property purchases, providing deposits for over 300,000 mortgages for adult children to purchase homes worth GBP77bn in 2016. The research found that 256,400 of these purchases will be assisted by the buyer’s parents and a further 22,500 will be supported by grandparents, while other family members or friends will help with another 27,000 mortgage deposits.
Legal & General said the Bank of Mum and Dad has been revealed to be the equivalent of a top 10 mortgage lender in the UK, making an average financial contribution of GBP17,500 or 7% of the average purchase price.
Cebr data also found that 57% of Bank of Mum and Dad contributions to mortgage deposits are gifts, 18% are loans with no interest and 5% are loans with interest.
Commenting on the research, Nigel Wilson, CEO of Legal & General, stated: “The Bank of Mum and Dad plays an increasingly vital role in helping young people take their early steps on the housing ladder.
“But the generosity being displayed by UK families doesn’t make up for intergenerational unfairness – younger people today don’t have the advantages the baby-boomers had, including cheap housing that delivered windfall gains. People will always want to help family members – it is a natural thing to do. Relying so heavily on the Bank of Mum and Dad however risks increasing inequality as many young people today are not lucky enough to be able to access parental support when buying a home, or can’t afford to buy even with parental help.
“We have a supply-side problem in housing – we are simply not building enough houses. We need to build more, especially as the Bank of Mum and Dad could soon start to experience a funding crisis of its own.”