Bank of Mum and Dad is 9th biggest mortgage lender
THE Bank of Mum and Dad is now on a par with the UK’s ninth-largest mortgage lender, according to a report published today.
Generous parents now fund more than a quarter of all house purchases in Britain.
They are set to contribute towards 26 per cent of property transactions in the UK this year – or 298,000 deals.
They will give a total of more than £6.5billion to help their children buy homes in 2017, up from £5billion last year, according to the report by Legal and General and the Centre for Economics and Business Research.
This puts them on par with Yorkshire Building Society, the UK’s ninth-largest mortgage lender, in terms of the amount of money extended to buy property.
The figures underline just how dependent young families have become on older generations to get on the housing ladder after years of rising house prices and muted wage growth. Some 79 per cent of parental help goes to buyers under the age of 30.
Nigel Wilson, chief executive 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 inter- generational inequality that creates the demand for Bank of Mum and Dad 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 problem is getting worse, not better. Bank of Mum and Dad funding is growing expo- nentially. We need real action to fix the housing market and restore affordability for all.’
Mr Wilson added: ‘ The UK is experiencing a 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. As well as providing much needed new properties, it will also deliver economic growth and new jobs.’
The amount of money spent by parents on homes for their children is set to rise from an average of £17,500 last year to £21,600 this year, the report said.
Parents in the South West of England are the most generous, providing £30,000 of financial support per transaction – even more than the £29,400 offered in London. Welsh parents give the least – some £12,500.
The percentage of those requiring financial help to get on the property ladder under the age of 35 stands at 62 per cent.
This year 42 per cent of those who buy a house will expect a helping hand from their parents, which is up by around a third from last year.
Even though mortgage rates are at a record low, high prices mean first-time buyers without a large deposit have difficulty qualifying for loans.
In the year to February, the average house price rose 5.8 per cent to £218,000, according to the Office of National Statistics. This was a slight fall on the average annual house price growth in 2016, which was 7.3 per cent.