For many younger people they are the lender of first choice for a range of needs, but new research by Legal & General and Cebr has highlighted just how much we depend on the bank of mum and dad – particularly when it comes to getting on the property ladder. New figures have revealed that bank of mum and dad is on course to contribute an average of £24,100 to help their children into their first house – some £6,000 more than the 2018 figure of £18,000.
The jump in loan sizes has increased total lending for the bank of mum and dad by 10% this year – up to £6.3bn from £5.7bn in 2018 – making bank of mum and dad the 11th largest mortgage lender in the UK.
Money from parents will continue to support thousands of buyers across the country in 2019 – being involved in more than a quarter of a million property purchases. This amounts to nearly one in five transactions in the UK mortgage market. In total, the bank of mum and dad will help buyers to purchase property worth nearly £70bn this year. In some parts of the UK, there has been an even bigger rise in contributions from family or friends. In the North West, the average bank of mum and dad ‘loan’ has nearly doubled from £12,900 to more than £24,000, while the South West saw the average contribution rise by over £10,000 to £29,700.
This shift in loan size could be because parent lenders are supporting family and friends to purchase larger properties. Three-bedroom houses or flats were the most commonly purchased properties in 2019 (44%), and well over a third (38%) have helped family or friends to buy a two-bedroom property. In fact, 15% of lenders were even helping loved ones to purchase properties with four or more bedrooms.
This year’s findings also suggest that the bank of mum and dad is playing a more complex role in the housing market than previously thought. Millennials (those aged 35 and under) continue to rely on mum and dad the most, with 62% needing financial support from their parents or other family members and friends. However, loans from mum and dad are helping more than just young first-time buyers. Findings show that more than a fifth of people aged 45-54 have received financial assistance from elderly parents to purchase their latest property, while around 7% of over-55s have also received help from family or friends to buy their most recent home. This support for older buyers is expected to double, with 14% of Britain’s over-55s expecting assistance from their parents for a future house purchase.
Of course, not everyone has parents who are able to assist with a house purchase for one reason or another. For those people, the Government’s various Help to Buy schemes have been established across the UK. The help on offer takes the form of an equity loan guaranteed to be interest-free for the first five years. However, buyers in these schemes are restricted to the purchase of new build houses. Indeed, some recent news stories have suggested that many people who used the Help to Buy schemes could have bought a house without the assistance of this scheme – drawing the question of who these schemes are helping in reality.
Find out more with our Help to Buy equity loan guide and see our comparison chart for the best first-time buyer mortgages.
