According to a report from Legal & General and CEBR (Centre for Economics and Business Research) the so called “Bank of Mum and Dad” will lend a total of 6.3 billion in unsecured loans this year, making it the equivalent to the 11th largest mortgage lender in the UK. Parents and family members will help with more than a quarter of a million (259,400) property purchases in 2019, down from 316,600 transactions in 2018. However, this figures still amounts to nearly one in five (19%) transactions in the UK mortgage market.
The typical parental contribution to their offspring in 2019 is up by £6,000 compared to 2018. This jump in unsecured loan borrowing has increased lending by the Bank of Mum and Dad by 10% up to the 6.3bn, from 5.7bn in 2018.
London has the highest contributors with the Bank of Mum and Dad ending £31,000 on average. However Wales isn’t too far behind with an average of £30,600.
Throughout the country there have been some significant rises in contributions from family and friends. The North West has seen the average Bank of Mum and Dad loan double to more than £24,000. Similarly in the South West the average contribution has risen by over £10,000 to £29,700.
The shift in loan amounts could be because the Bank of Mum and Dad lenders are helping loved ones to purchase larger properties. Three-bedroom houses or flats were the most commonly purchased properties in 2019 (44%), and more than a third (38%) have helped family or friends to buy a two-bedroom property. Some 15% of family lenders are even helping loved ones to purchase properties with four or more bedrooms.
The findings by Legal & General also suggest that the Bank of Mum and Dad is playing a far more significant and complex role that first thought. 62% of those aged under 35 still rely on their parents for financial support, but the research also established that 22% of those aged 45-54 have also received financial assistance from the Bank of Mum and Dad to purchase property. Around 7% of over 55’s have also received help when buying a property. Indeed the financial support for older buyers is expected to at least double, with 14% expecting assistance form the Bank of Mum and Dad for a future property purchase.
Group chief executive at Legal & General, Nigel Wilson 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 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.”