As house prices continue to rise and slow wage growth continues, combined with a shortage of supply and tougher mortgage lenders, it remains very difficult for many young people to step onto the property ladder.
This has resulted in the ‘Bank of Mum and Dad’ now playing a major part in Britain’s housing market as parents are increasingly helping their children take their early steps on to the property ladder.
According to a new research by Legal & General and the Centre for Economics and Business Research (Cebr), the so-called ‘Bank of Mum and Dad’ is equivalent in size to one of the top 10 mortgage lenders in the UK, and this year they are on track to lend over £5bn, providing deposits for more than 300,000 mortgages, leading to £77bn worth of home purchases in the year. Apparently the Bank of Mum and Dad’s average financial contribution is £17,500, equating to 7% of the average purchase price!
Findings from Legal & General’s also showed that 57% of the contributions are “gifts”, moreover 18% are loans with no interest and only 5% are loans with interest.
Despite the Government’s Help to Buy scheme and low interest rates, many young people are still struggling to secure a property.
Nigel Wilson, CEO of Legal & General comments on the findings “But the generosity being displayed by UK families doesn’t make up for intergenerational unfairness – younger people today don’t have the advantages that baby boomers had, including cheap housing that delivered windfall gains.
People will always want to help family members – it is a natural thing to do. Relying so heavily on the Bank of Mum and Dad, however, risks increasing inequality as many young people today are not lucky enough to be , able to access parental support when buying a home, or can’t afford to buy even with parental help.”
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