The Bank Of Mum & Dad
Date Published 12 June 2018
The Bank of Mum and Dad is now an established part of the UK housing market. Parents helping their children onto the housing ladder are paying an average of £18,000 - but the amount varies considerably by area. In total for the year it will be the equivalent of a £5.7bn mortgage lender, supporting around 27% of all buyer, up from 25% in 2017.
Figures from Legal and General show parental generosity varies across the country, unsurprisingly the highest average loan comes from families in London with a spend of £30,600. Here in the South West we are supporting our family by an average £19,300 which is the third highest amount in the country. In most cases, it is parents donating the money for these purchases, but grandparents, other family members and even friends supported 108,800 purchases between them last year.
Surprisingly, the research suggests it`s not just those in early adult life or first-time buyers who are getting support. Over four out of 10 buyers aged 35 to 44 received financial help from family and friends, with more than a quarter of those aged 45 to 54 still relying on the Bank of Mum and Dad.
Can it go on? An average `loan` of £18,000 is not exactly pocket change and when you look at the country as a whole £5.7bn is an eye watering sum of money. However, you may be surprised to know this is actually lower than in 2017. The total that year was a massive £6.5bn!
Unsurprisingly this is having a toll on the parents, with 10% admitting that their generosity had left them feeling less secure about their own financial future, and nearly 1 in 5 say that they cut back as a result.
Not every parent has such a large sum of cash available so where does the money come from? There are ways for parents to use the equity in their existing homes to help their children buy their first property, without resorting to selling up and downsizing.
Lenders have recognised the trend and now there are schemes available where parents and children to go into partnership. For example, The Post Office offers a ‘family-link` mortgage, which works by giving the first-time buyer a 90 per cent loan-to-value mortgage secured against the property they`re buying plus an interest-free five-year loan secured on a close relative or parent`s home.
If you are looking for your first home and want to know more about the options available call Matthew or Sarah on 01752 206040.