Parents’ £ 5bn home loan generosity

THE “Bank of Mum and Dad” is now a £ 5billion mortgage lender and will be involved in a quarter of all property purchases this year.

The billions lent by generous parents will provide deposits for more than 300,000 mortgages on homes worth £ 77billion in 2016.

The figures put parents on a par with a top 10 mortgage lender. However, there will be a crisis when the next generation attempts to move on to the property ladder, financial experts have warned.

Nigel Wilson, chief execu- tive of Legal & General, said: “The Bank of Mum and Dad plays an increasingly vital role in helping young people take their early steps on the housing ladder.

“But relying so heavily on it risks increasing inequality as many young people today are not lucky enough to be able to access parental support when buying a home, or can’t afford to buy, even with parental help.

“We have a supply problem – we are simply not building enough houses. We need to build more, especially as the Bank of Mum and Dad could soon start to experience a funding crisis of its own.”

Legal & General and the Centre for Economic Business Research collaborated for the study, finding that the “bank” will hit a nationwide “funding crisis” by 2035.

And regions with the highest and fastest growing house prices face trouble sooner.

London is already at the tipping point, with younger buyers receiving an average of 6.2 per cent of a home’s purchase price from parents. It represents 51 per cent of the average “bank’s” household’s wealth in London, excluding property assets.

Families cannot continue to use the majority of their wealth to help offspring without risking their own financial stability, the report said.

Mr Wilson said parental generosity does not make up for the “intergenerational unfairness” of baby- boomers’ housing and windfall gains.

The average parental contribution is £ 17,500 or seven per cent of the average price.