Bank of Mum and Dad helping with a quarter of home purchases
The Bank of Mum and Dad now takes part in a quarter of all housing transactions with loans set to reach nearly £6 billion this year alone, new research has found.
The Bank of Mum and Dad will be the equivalent of a £5.7bn mortgage lender in 2018, according to analysis by Legal & General and the Centre for Economics and Business Research.
The study found that 27 per cent of buyers will receive help from friends or family, up from 25 per cent in 2017.
The Bank of Mum and Dad will help 316,600 family members to buy a home this year, up from 298,000 in 2017.
The value of Bank of Mum and Dad-supported property purchases in 2018 will rise to £81.7 billion, representing a £4.2 billion or 5 per cent increase since 2016.
However, parents are providing smaller sums – the average contribution will decline from £21,600 in 2017 to £18,000 in 2018.
Total lending has reduced from its height at £6.5bn in 2017 to £5.7bn in 2018. This is, however, still an overall increase against £5bn of lending in 2016.
Even homeowners aged between 45 and 55 are now relying on parental support, with one in five receiving financial contributions towards their home purchases
Equity release has increased slightly as a source of funding for loved ones’ home purchases, from 3 per cent to 4%.
Nearly half of over 55s that are open to the idea of using equity release to put money towards a loved one’s home purchase deposit, with 20 per cent wanting to contribute to mortgage payments and other housing costs
Legal & General group chief executive Nigel Wilson says: “The volume of transactions depending on Bank of Mum and Dad funding keeps on growing, even as parents find it harder to provide as much money for the deposit.
Bank of Mum and Dad funding is a vital plank in the housing market, but this year the supply of funds is being squeezed.
“This is not a positive trend – nor is it sustainable or fair for our parents (the lenders) and young people (the borrowers) to remain so co-dependent when it comes to housing purchases.
He adds: “We need to take action to fix the housing market and open up affordability for all.
“Institutions like Legal & General are making a positive difference in the supply of affordable residential housing as well as the towns and cities in which the homes are built.
“Jobs, infrastructure and economic growth are needed to create thriving communities where people can afford to buy.”