Help from family members already provides billions of pounds of help to younger homebuyers, however, the report highlights how with the right support this role could grow, without jeopardising the long-term financial wellbeing of older generations.
Recommendations in the report include:
1. More products and innovation: lenders expanding provision, offering more flexible product features and looking again at high loan to value ratio mortgages and how they are underwritten.
2. Clearer communications: breaking through the jargon to explain the options to all generations.
3. Tackling other barriers: such as the impact of regulations and taxes that limit lending or how property wealth can be put to use.
But the ‘Bank of Mum and Dad’ isn’t necessarily all about parents and grandparents handing over cash in the form of gifts or loans. Lenders can and do facilitate support between generations by parents providing guarantees or using their property or savings as security for the first-time buyer’s mortgage.
Parents can also release money through an equity release mortgage or by downsizing.
Older generations could use their property more inventively e.g. through ‘downsizing in situ’ and private equity loans could also contribute to the market. However, all of these are expected to be comparatively small relative to the more direct support from family members’ financial resources.
Seventy per cent of the public see the difficulties young people have buying a home of their own as one of the biggest issues the country faces. However, many also believe that both lenders and the Government could do more to help.
The aim of Building on the Bank of Mum and Dad is to generate practical ideas to help more young people to buy. Suggestions that could improve the opportunities for people who have access to the Bank of Mum and Dad, as well as those who don’t.
Report co-author Bob Pannell said: “Our young people face huge challenges in buying their first homes. Families instinctively want to help, and it’s the job of lenders, regulators and government to ensure that they have more opportunities to do so in a sustainable way.”
Robin Fieth, BSA Chief Executive said: “Home ownership remains a fundamental ambition for the majority of people. Against the challenging backdrop of high prices, a woefully inadequate supply of homes and a growing intergenerational divide, new ideas and strong debate are essential. Family help – the so-called ‘Bank of Mum and Dad’ - is great for those fortunate enough to have this option, but innovations in underwriting could help all potential first-time buyers.”
