Parents contributing towards property purchases for their children are lending more than they used to, research from Legal & General shows.
The Bank of Mum and Dad (BoMaD) is now the 11th largest mortgage lender in the UK, funding 1 in 5 house purchases.
This comes after loan sizes increased by 10% in 2019. The amount being lent rose from £5.7bn to £6.3bn, a £600 million rise from 2018.
Although the amount lent has increased, the number of homes purchased in 2019 was 20% lower than in 2018. Instead of purchasing more homes, BoMaD lenders have contributed more on average per loan.
In 2018, the average loan was £18,000. This rose by £6,000 more in 2019, with the average loan amounting to £24,000.
This increase is double the £3,000 growth of the average UK home in 2019.
This may be due to BoMaD lenders helping their children to buy larger properties. In 2019, three-bedroom houses or flats were the most purchased properties (44%), and 15% of lenders were helping to purchase properties with over four bedrooms.
It’s not just first-time buyers who are requiring help to buy either. The Bank of Mum and Dad is also assisting 22% of people aged 45-54 to buy their newest property.
14% of the UK’s over 55s currently expect assistance from BoMaD and this number is set to double over the next five years.
Nigel Wilson, group chief executive at Legal & General, said:
“This year [2019], parents or grandparents, family or friends are set to lend thousands more to fund nearly one in five house purchases.
The Bank of Mum and Dad is a symptom of Britain’s broken housing market and it goes far beyond millennials relying on their parents as more older borrowers look to family and friends for financial support.
It’s dependency, not generosity.
It’s also almost certainly eroding older people’s finances when they need it to fund care and retirement – parents, grandparents, even friends are digging ever-deeper into their savings and pensions.
Real action is needed to deliver thousands more new and affordable homes to change the market for good, across a range of tenures.”
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