BoMaD to drive recovery
Bank of Mum and Dad to drive UK housing market recovery after COVID-19
The Bank of Mum and Dad will be a driving force behind the recovery of Britain’s housing market as buyers struggle with the economic impact of the COVID-19 crisis, new research from Legal & General and Cebr shows. Nearly one in four housing transactions (23%) will be backed by ‘BoMaD’ in 2020, with a quarter (24%) of borrowers now more reliant on financial support from family and friends.
Mirroring the impact of the lockdown on the UK housing market, the Bank of Mum and Dad will lend just £3.5bn to loved ones this year – almost halving the £6.3bn parents, grandparents, other family and friends lent in 2019. It will also fund 85,000 fewer home purchases. The figures reflect the effective closure of the housing market under the COVID-19 induced lockdown and a wider collapse in purchases reported by HMRC, with total property transactions similarly falling by nearly half in Q2 2020. Despite this, the Bank of Mum and Dad will still be involved in 175,000 housing transactions, within an estimated transaction value of £50.3bn, this year. With the housing market now re-opened, BoMaD is ready to step up and be a key element of the housing sector’s recovery, as thousands of buyers press ahead with their plans to buy after the lockdown.
Legal & General’s research shows that the coronavirus crisis has encouraged BoMaD lenders to be even more generous than usual. This year, family members and friends will lend an average of £20,000 towards deposits. As a result of the crisis, 15% of BoMaD ‘lenders’ are now planning to give more than they would have done before the pandemic to help their loved ones. Of those saying that coronavirus has changed the amount of money they are willing to give, almost one in five (18%) want to give at least 50% more.
Homebuyers in London are set to receive the most, with the average BoMaD ‘loan’ standing at £25,800. This was followed by the East Midlands, where lenders have given a significant boost to the average BoMaD contribution this year, from £16,000 in 2019 to £24,100 in 2020. Family and friends in the North East and Yorkshire are contributing the least, but on average are still lending a generous £13,800 to help loved ones buy a home.