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While the Bank of Mum and Dad is still a formidable lender when it comes to that all-important home purchase, with £5.7 billion expected to be lent in 2018, new research from Legal & General and the Centre for Economics and Business Research (Cebr) has revealed that they are giving out smaller amounts.
Their data shows that parents will be helping 316,600 loved ones to buy a home this year, up from 298,300 last year, resulting in sales that will total £81.7 billion in property value. This marks an increase of 5% (or £4.2 billion) since 2016. Total lending, however, has reduced from a high of £6.5 billion in 2017 to £5.7 billion, with the average parent contributing £18,000, down from £21,600 last year.
"The fact that in 2018, one in four housing transactions in the UK will be dependent on the Bank of Mum and Dad, while hard-pressed parents are finding it more difficult to provide the funds to help their family with deposits, will further exacerbate the UK's housing crisis," predicted Nigel Wilson, Group Chief Executive at Legal & General.
The figures also revealed that among under-35-year-olds, nearly three in five will be getting monetary assistance from family or friends to be able to buy a property, with even one in five of homeowners aged between 45 and 55 getting help from their parents. Among those over 55, 8% are now receiving assistance from their family.
With older people increasingly relying on help and the amount that parents can give decreasing, it's more important than ever that prospective buyers use every means at their disposal to save up. For first-time buyers, this means looking into the lifetime ISA and Help to Buy ISA schemes to see if some Government support could help make their homeownership dreams come true.
Those who aren't able or don't want to use such a Government scheme will want to make sure they have the best savings rate possible, so they can gain some inflation-beating interest while they save up. And any (grand)parents who want to help their offspring, but don't have the funds, could consider equity release.
In fact, Legal & General's data shows that nearly half of over-55s are open to the idea of using equity release to help fund a loved one's home purchase deposit, although only 4% have done so (up from 3% last year). "The volume of transactions depending on Bank of Mum and Dad funding keeps on growing, even as parents find it harder to provide as much money for the deposit," concluded Nigel.
He went on: "Parental funding is a vital plank in the housing market, but this year the supply of funds is being squeezed. This is not a positive trend - nor is it sustainable or fair for our parents and young people to remain so co-dependent when it comes to housing purchases. We need to take action to fix the housing market and open up affordability for all."
Those that do manage to get enough money together to buy a home – with or without the Bank of Mum and Dad – would do well to compare first-time buyer mortgages very carefully, to make sure they get the most out of their investment and keep their repayments as low as possible.
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