First Time Buyer
Bank of Mum and Dad is ‘ninth largest mortgage lender in the UK’
The Bank of Mum and Dad will lend more than £6.5bn in 2017, up from £5bn in 2016, providing deposits for nearly 300,000 mortgages.
According to a report by Legal & General and Centre for Economics and Business Research (CEBR), lending by the Bank of Mum and Dad is on par with the ninth largest mortgage lender in the UK – Yorkshire Building Society’s £6.6bn in 2015 – up from number 10 last year.
It estimates parents will be involved in 26% of all property transactions that take place this year, helping kids purchase homes worth £75bn. And the financial support has risen from £17,500 in 2016 to £21,600 in 2017, an increase of 23%.
Millennials are the biggest recipients of their parents’ funding with 79% of help going to those aged under 30 and the majority of help going towards the deposit rather than mortgage payments.
Legal & General and CEBR also found parents in the South West of England are the most generous, providing £30,000 of financial support on average, even more than parents in London (£29,400). Welsh parents give the least – £12,500.
But it also found that parents don’t provide equal help to all their children. A fifth (18%) only help the eldest child buy a property, whereas 16% favoured the younger child.
Nigel Wilson, CEO of Legal & General, said: “The 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 BoMaD 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.”
Wilson said that despite transaction volumes falling in the housing market, from 305,900 in 2016 to 298,300 in 2017, parents’ 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.”