The ‘Bank of mum and dad’ (BoMaD) will lend £6.3bn in 2019, rising 10 per cent from £5.7bn in 2018, making the ‘lender’ the eleventh largest in the UK, research from Legal & General (L&G) and Cebr revealed.
According to L&G’s poll, parents will contribute around £24,100 towards their children’s housing costs, rising £6,000 when compared to last year’s average of £18,000, which will support buyers in purchasing a total of nearly £70bn of property wealth this year.
In the north west, average loan sizes increased more than in any other part of the UK – doubling from £12,900 to more than £24,000 – while parents in the south west will gift about £10,000 more than last year, with the average loan reaching £29,700.
BoMaD lenders in London are contributing the most to support their children in their first steps on the property ladder, gifting their loved ones an average loan size of £31,000.
This shift in loan size could be because BoMaD lenders are supporting family and friends to purchase larger properties. Three-bedroom houses or flats were the most commonly purchased properties in 2019 (44 per cent), and well over a third (38 per cent) have helped family or friends to buy a two-bedroom property. Just under a sixth (15 per cent) of lenders were even helping loved ones to purchase properties with four or more bedrooms.
However, despite the rise in value, the BoMaD will fund nearly 20 per cent fewer property purchases than in 2018, being involved in more than a quarter of a million (259,400) property purchases. This figure is down from 316,600 transactions in 2018, but it still amounts to nearly one in five (19 per cent) of all transactions in the UK mortgage market.
Commenting on the findings, L&G group chief executive 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...
“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.
“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.”
Furthermore, the findings highlighted that the BoMaD is playing a more “complex” role in the housing market than previously thought, as the number of those between 45 and 54 that are receiving financial support from their parents has increased to more than a fifth. On top of this, around 7 per cent of over-55s have received help from family or friends to purchase their most recent home.
Parents are expected to make the largest contribution to family members, responsible for £4.4bn of lending, while grandparents will lend £675m in 2019.
Subscribe to our newsletter to receive breaking news by email.