The latest data and analysis from Legal & General has revealed that lending at the Bank of Mum and Dad (BoMaD) has increased on average by £6,000 during the last year as young people continue to struggle to get on the property ladder.
According to the figures, BoMaD lenders will be more generous this year than ever before, as the average contribution increases to £24,100 - around £6,000 more than the average lent in 2018. This rise is double the average UK house price increase of £3,000 in the year to March 2019.
The findings also suggest that the Bank of Mum and Dad is playing a more complex role in the housing market than previously thought, helping more than just young first-time buyers.
The findings from Legal & General show that more than a fifth (22%) of people aged 45-54 have received financial assistance from BoMaD to purchase their latest property. 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 BoMaD for a future house purchase.
Nigel Wilson, group chief executive at Legal & General, said: “The Bank of Mum and Dad continues to be the ‘iceberg’ mortgage lender beneath the surface of our housing market – all but invisible yet exerting a massive influence, funding purchases across the country and helping people to defy the economics of affordability and realise their housing dreams. This year, 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. Our reliance on ‘BoMaD’ funding is an increasingly skewed facet of the UK housing market. It’s dependency, not generosity. It’s is socially divisive and it’s creating a ‘locked out’ generation of first-time buyers who aren’t lucky enough to benefit from this kind help. 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. At Legal & General we are playing our part, working to bring positive change by investing in towns and cities throughout the country. Delivering the jobs, infrastructure and homes our thriving communities need.”
Ishaan Malhi, CEO and founder of Trussle, said: “The fact that so many young people can’t afford to move out of their parents’ homes in fear of not being able to get onto the property ladder is alarming.
Too many of them are forced to put their lives on hold in a bid to get onto the property ladder. At Trussle we’re fighting for fairer mortgages to ensure that the process is transparent and simple. And in turn, a process that will help young people feel empowered when embarking on what should be an exciting, hassle-free journey of buying their first home.”
Getting a mortgage is often one of the biggest financial and emotional commitments a person will make in their lives and ensuring the industry is supporting young people as they take this step is crucial.”
Will Hale, CEO of equity release adviser, Key, commented: “Over a quarter (27%) of all buyers receive help from not only the Bank of Mum and Dad (BOMAD) but also from a wider range of family and friends. This report from Legal & General clearly highlights that intergenerational giving is alive and well in the UK today.
However, the amount that BOMAD has been able to contribute has fallen from £21,600 (2017) to £18,000 (2019) as older family members find that they need to tighten their own belts rather than being as generous as they might want. Analysis from the Equity Release Council suggests that for the over-65s, 40p in every pound of their assets is tied up in residential property so it would seem logical to see more people looking to this asset to help their children or grandchildren onto the property ladder.
While it is natural for families to want to help, it is vitally important that this is done in a sustainable manner which doesn’t significantly negatively impact people’s own financial well-being in retirement. Good advice is key and people who are considering how they might access the equity in their property should speak to a specialist adviser who can help them find the right solution for their individual circumstances.”