Bank of Mum & Dad to lend £6.3 billion

The Bank of Mum & Dad could lend up to £6.3 billion this year to help their children get their first foot on the property ladder.

New research from Legal & General (L&G) predicts that parents will be involved in more than a quarter of a million deals in 2019, making them the equivalent of Britain’s 11th biggest mortgage lender.

Higher

The number of transactions is likely to be down over last year, but the average value is higher.

Last year parents contributed £5.7 billion to 316,600 purchases.

This year they are expected to spend more than £½ billion more to facilitate 259,400 deals.

Double

Their average contribution has risen by £6,000 to £21,400, double the UK house priced increase.

In total they are expected to help in the purchase of £70 billion worth of property this year – one in five of all home purchases.

Total

Around £4.4 billion of the total will come from parents with grandparents chipping in another £657 million.

Other family members and friends will combine to supply the remaining £1.2 billion.

More than half the contributions will come from cash savings, but this year equity release has increased its share.

Survey

The L&G survey spoke to 1,700 borrowers and over 2,000 adults and while it found that 62% of people under the age of 35 needed financial help 22% of those aged between 45 and 54 and 7% of those over 55 were also getting help from family members and friends.

Nigel Wilson, L&G group chief executive, said: “The Bank of Mum and Dad (BOMAD) 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.

Iceberg

“The bank of mum and dad continues to be the ‘iceberg’ mortgage lender beneath the surface of our housing market – all but invisible yet exerting a massive influence, funding purchases across the country and helping people to defy the economics of affordability and realise their housing dreams.

“This year, parents or grandparents, family or friends are set to lend thousands more to fund nearly one in five house purchases.”

Dependency

“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.

Digging ever deeper

“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.”

Regions

As might be expected the largest average contributions are made in London at £31,000, but below is a list for the averages across England and Scotland:

  • North East, £13,900
  • North West, £24,200
  • Yorkshire and the Humber, £17,200
  • East Midlands, £16,000
  • West Midlands, £13,700
  • East of England, £25,500
  • London, £31,000
  • South East, £29,000
  • South West, £29,700
  • Scotland, £16,400