L&G – Bank of Mum and Dad lending hits £6.3bn
The Bank of Mum and Dad is set to lend £6.3bn this year, up from £5.7bn in 2018, the latest research from Legal & General suggests.
The findings show that although transaction volumes are down and parents and family are set to fund 20 per cent fewer property purchases than last year, they are putting forward a higher average sum in most cases.
Parents and relatives stand to contribute to 259,400 purchases this year compared to 316,600 in 2018
The average contribution from parents has risen by £6,000 to £24,100, which is double the average UK house price increase of £3,000 in the year to March 2019.
Total lending by the Bank of Mum and Dad means it is effectively the 11th largest lender in the UK and helps to fund one in five of all home purchases.
Larger loan sizes could suggest that parents and relatives are helping younger people buy larger family homes as three-bedroom houses or flats were the most commonly purchased properties in 2019 by 44 per cent of those receiving a helping hand.
Parents are expected to make the biggest contribution to family members in 2019 and will be responsible for £4.4bn of lending, while grandparents will lend £657m.
Other family members and friends will lend £1.2bn to help loved ones buy a home.
More than half are using cash savings, but this year equity release has become the third largest source of funds in 16 per cent of cases.
L&G group chief executive Nigel Wilson says: “The Bank of Mum and Dad is a symptom of Britain’s broken housing market and it goes far beyond millennials relying on their parents as more older borrowers look to family and friends for financial support.
“Our reliance on ‘BoMaD’ funding is an increasingly skewed facet of the UK housing market. It’s dependency, not generosity.
“It is socially divisive and it is creating a ‘locked out’ generation of first-time buyers who aren’t lucky enough to benefit from this kind help.
“It’s also almost certainly eroding older people’s finances when they need it to fund care and retirement – parents, grandparents, even friends are digging ever-deeper into their savings and pensions.
“Real action is needed to deliver thousands more new and affordable homes to change the market for good, across a range of tenures.”
Source: Mortgage Strategy