The ‘Bank of Mum and Dad’ Becomes One of Britain’s Biggest Lenders
With so many young people struggling to get on the property ladder thanks to sky high property prices teamed with modest salaries, it’s unsurprising that so many financially secure parents are rushing to help their adult children buy their own homes.
In fact, a new study by Legal & General reveals that the ‘Bank of Mum and Dad’ has officially become Britain’s ninth biggest ‘mortgage lender’, offering £6.5bn in loans and gifts this year alone.
Family wealth accounts for 26% of all UK property transactions and approximately 62% of first time buyers under the age of 35 seek help from parents, friends and family when purchasing a property.
Estimates suggest that parents will fund property purchases worth about £75bn in 2017, helping their children secure more than 298,000 mortgages.
The average amount each parent is lending has risen too, from £17,000 in 2016 to £21,600 this year. Those in London and the south-west of England are contributing the most to their children’s mortgage, donating or lending between £29,400 and £30,000.
Legal & General’s report warns that this increase in lending from parents adds to the growing evidence that the UK housing market is failing to work properly. Nigel Wilson, the chief executive of L&G said: “Parental funding is growing exponentially. This is not a good thing, nor is it sustainable or equitable.
“The intergenerational inequality that creates the demand for parental 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 UK is experiencing a supply-side 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.”
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