‘Bank of Mum and Dad’ is expanding
Parents are leading a trend to help other people’s children on to the property ladder in exchange for a return on the investment. Research shows parents’ investments could be more than a family affair.
MONEY-SAVVY PARENTS in Yorkshire and the Humber are spearheading a trend to help other people’s children on to the property ladder in exchange for a return on the investment.
Research by the financial services group, Legal & General, has previously shown that the existing level of cash support from parents and family members for young homebuyers makes them the equivalent of a UK top 10 mortgage lender.
Now a new study published today by Legal & General in partnership with economics consultancy Cebr has shown that the so-called Bank of Mum and Dad’s investments could be more than just a family affair.
According to the new research, 27 per cent of parents across the UK would consider supporting other people’s children with their home ownership ambitions. That figure rises to 31 per cent for Yorkshire and the Humber.
But recipients of such support would not be getting something for nothing – nearly 30 per cent of potential investors in the region say they would charge interest on their loans. More than 30 per cent of those surveyed in Yorkshire and the Humber would expect monthly rent from the occupier while 10 per cent would want a share in the ownership of the property.
Stephen Smith, director of Legal & General Housing Partnerships, said: “The readiness to consider funding other people’s children is clear proof that across the country people are looking for an innovative way to increase home ownership.
“An extended period of low interest rates and new restrictions on the buy-to-let market have left older generations searching for a good return on their investment.
“Initiatives for funding other people’s children offer a new way to invest into the property market, as they help to pair up older generations looking for a better investment return with prospective homeowners who need financial help.
“Clearly the demand for investment opportunities is there – now we need to see if the industry responds with product innovation to enable the Bank of Mum and Dad to spread beyond funding the immediate family unit.”
Legal & General estimates that more than 275,000 homebuyers will get some form of financial support from their parents or grandparents this year.
The average amount handed over is £17,500 or 6.9 per cent of a typical property purchase price.
Just over 27 per cent of prospective homeowners across Yorkshire say they are hoping to receive assistance from family members, compared to 35 per cent of would-be buyers in London and 44 per cent in the South-West.
Mr Smith added: “Younger generations today do not have the advantages that previous generations had, including a sufficient supply of affordable housing that delivered strong returns.
“The simple fact is that we do not have enough homes to meet the rising demand for home ownership in the UK, which is greatly affecting the availability and cost of property for young people.
“It is an absolute necessity to build more, especially as the Bank of Mum and Dad may start to face a supply crisis of its own.
“Fixing this problem will require more than just help from the Government, however.
“Industry leaders like Legal & General can help transform not just residential housing, but even our urban areas in which new homes are constructed.
“Infrastructure, employment and economic growth are three key pillars for creating prosperous communities where people want to live.”
31 Percentage of parents in Yorkshire and Humber who would consider backing other people’s children in home ownership plans