Bank of mum and dad' to lend £6.5bn this year making it one of the top 10 lenders in the country, reports predict...... This type of work can be complicated so needs doing correctly, please consult one of our fully qualified Property lawyers in any one of our offices
Parents are predicted to lend more than £6.5bn this year to help their children get on the property ladder as first-time buyers continue to struggle to afford homes.
This is a 30% increase on the £5bn loaned in 2016, according to research from Legal & General and economics consultancy Cebr, and means parents will be involved in more than 25% of UK property transactions.
The so-called bank of mum and dad will help fund property purchases worth about £75bn in 2017, the report says, including deposits for more than 298,000 mortgages. The £6.5bn figure is similar to the amount lent by the country’s ninth-biggest mortgage lender, Yorkshire Building Society, according to L&G.
Parental assistance is expected to have risen from an average of £17,000 in 2016 to £21,600 this year. Millennials are the biggest recipients, with 79% of the funding going to people under 30.
The south-west of England and London will see the largest average parental contribution per transaction, at £30,000 and £29,400, with Wales the lowest at £12,500.
The report says the amount of lending by parents is more evidence that the UK housing market is failing to work properly. Nigel Wilson, the chief executive of L&G said: “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 [parental] funding is growing exponentially. This is not a good thing, nor is it sustainable or equitable for our parents [the lenders] or young people [the borrowers].
“The intergenerational inequality that creates the demand for [parental] 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.”
The report also found that just 40% of parents provide equal financial support to all their children, with 18% only helping the eldest child buy a property and 16% supporting the youngest child.
And most parents provide a fixed amount of help, despite regional variations in property values. Only 20% were prepared to provide more assistance for children living in pricier areas. But in London, 40% of homeowners had received financial help from their parents to buy their property.