‘Bank of Mum and Dad’ one of UK’s biggest mortgage lenders
The Bank of Mum and Dad is now the 11th largest mortgage lender in the UK, according to new research, providing more than £6bn to help their children onto the property ladder in 2019.
Our partner Legal & General’s latest Bank of Mum and Dad (BoMaD) report reveals that nearly two-thirds (62%) of home buyers under the age of 35 have been helped out by their parents to the tune of an average £24,100 - an increase of more than £6,000 from 2018. As a result, despite fewer transactions taking place in an uncertain housing market, the BoMaD is set to lend a staggering £6.3bn this year – a rise of more than 10% from the £5.7bn in 2018.
The nation’s mums and dads, plus other relatives and friends, are digging increasingly deep to help their offspring buy their first home or move up the ladder. And their generosity doesn’t only extend to younger buyers, with 36% of 35 to 44 year olds and 22% of 45 to 54 year olds also being supported by family in their most recent home purchases.
The figure effectively makes BoMaD the 11th largest mortgage lender in the UK. According to UK Finance, the UK’s largest mortgage lender in 2018 was Lloyds, lending £42.5bn. Next was Nationwide, lending £35.7bn, while the third biggest lender was Royal Bank of Scotland, providing £30.5bn of mortgages. The BoMaD figure dwarves government housing affordability schemes, such as Help to Buy schemes. The Help to Buy equity loan, for example, has supported fewer homebuyers in total than the BoMaD does in a single year.
There is hope for buyers struggling to afford a home, with UK house price growth slowing to 3.3% in 2018 - less than half the growth seen in 2016. However, very real concerns remain for would-be homeowners not fortunate enough to have the BoMaD on hand to help out. The report shows that the average house price was around £150,000 10 years ago; this figure looks set to double by 2023, while the average London price of £463,000 is well out of reach of many.
An L&G spokesperson said: “In total, we estimate that the Bank of Mum and Dad will finance more than 250,000 house purchases in 2019, most of them helped by parents (181,000), with a minority receiving help from their grandparents (27,200) or other family and friends (51,200). And there’s little sign of this declining: among prospective buyers, 45% of those 35 and under, and 35% among all ages, expect to receive help from the Bank of Mum and Dad.
“We should welcome the willingness of so many family and friends to help their loved ones onto and up the housing ladder, but it should concern us, too. For too many, the Bank of Mum and Dad isn’t just about generosity; it’s about dependency. And that dependency can reach well into middle age.
“At Legal & General, we believe reliance on the Bank of Mum and Dad to keep the housing market moving creates a sharp division between the haves and the have-nots, particularly among our young people. It helps many to buy, but does nothing to address a ‘locked out’ generation of first time buyers who aren’t lucky enough to benefit from this kind of help.
“Added to that, the Bank of Mum and Dad has a real cost for those who fund it. At a time when increasing longevity means retirement savings have to last ever longer, it risks eroding many older people’s finances when they need financial security.”
If you’re fortunate enough to be buying a property this year, our first-time home buyer’s guide is full of tips on the size deposit you’ll need, surveying and conveyancing and a moving checklist. It’s also the ideal time to look into income protection insurance, which continues to meet repayments should you lose your income.
We recently revealed that two thirds of homeowners are being mis-sold the mortgage myth, with providers telling them that protection insurances such as life cover and income protection are legal requirements when buying a home (this isn’t true). Our article ‘Do I need mortgage cover?’ will help you decide what’s right for you.