The Bank of Mum and Dad
The Bank of Mum and Dad (BoMaD) remains a pillar of the UK housing market. Last year, parents were feeling the squeeze, which meant that lending from BoMaD dropped to £5.7bn. But things are changing. Family and friends are now digging even deeper to support loved ones onto the housing ladder and total lending has soared above the £6bn mark.
In fact, the average BoMaD contribution is set to rise by more than £6,000, from £18,000 in 2018 to £24,100 in 2019. There have been even bigger rises in some parts of the UK, including the North West where the average ‘loan’ has nearly doubled from £12,900 to £24,000. The South West also saw the average contribution rise to £29,700 – an increase of more than £10,000 on 2018.
This could be because BoMaD is helping its ‘borrowers’ to buy even larger properties. Nearly half (44%) of all transactions supported by the Bank of Mum and Dad were for three-bedroom houses or flats, but 15% of ‘lenders’ were helping family to buy properties of four or more bedrooms.
This year, the Bank of Mum and Dad will be helping more than just young first-time buyers, too. The research shows that family and friends will support more than a fifth (22%) of people aged 45-54 onto and up the housing ladder, as well as 7% of over-55s. And this support isn’t just coming from parents. Other family members and friends will contribute a staggering £1.2bn to the BoMaD pot, while grandparents will ‘lend’ £657m.
As a result, BoMaD is now just outside the top 10 largest mortgage lenders according to UK Finance 2017 figures, and will help borrowers to purchase nearly £70bn worth of property this year. Our infographic below summarises the key findings, or you can read the full Bank of Mum and Dad 2019 report here.
Now in its fourth year, Legal & General’s research shows that BoMaD remains a symptom of Britain’s broken housing market. Yes, house prices are rising at more sustainable levels, and innovative schemes like Shared Ownership and Help to Buy mean that there is a good level of support for younger buyers in particular.
However, BoMaD plays a far more significant role in the housing market. Nearly one in five (19%) housing transactions still rely on funding from parents, grandparents, or other family and friends. In the five years since Help to Buy was launched, it has supported 210,964 property transactions – fewer than the Bank of Mum and Dad helps with in a single year.
In many cases though, this is dependency rather than generosity, and it could be locking out a generation of first-time buyers who aren’t lucky enough to have financial support from their family. Older people continue to feel the pinch of BoMaD, too. Over a quarter (26%) admitted that they weren’t confident they would have enough to live on in retirement because they assisted their children or grandchildren in getting onto the housing ladder.
BoMaD is a generous lender that deserves our thanks, but it is neither a sustainable nor a fair solution to Britain’s broken housing market. Real action is needed to deliver thousands more new and affordable homes for young and old, renters, homeowners and downsizers. We are playing our part at Legal & General to bring positive change by investing in our towns and cities to deliver the jobs, infrastructure and homes Britain desperately needs, but as an industry there is still more that we can do.