According to a report from Legal and General, The Bank of Mum and Dad is now a £5.7bn mortgage lender
Bank of Mum and Dad – A Major Player
This is the third year, Legal and General have produced the report. It finds that 27% of all buyers got help from family, mainly parents or friends, this is up from 25% in 2017. The average amount shows a drop from £21,600 in 2017 to £18,000. Not surprisingly, it’s mainly the young and first time buyers getting help. The under 35s get help in 59% of purchases. More surprising is that 43% of those between ages 35 and 44 also were also grateful for help. Over 200,000 property purchases in 2017 got help from parents, nearly a further 100,000 from grandparents and friends.
In London, 41% of buyers, the highest proportion in the country, relied on help receiving on average, just over £30,000.
How is it funded
About 70% came from savings, 20% from cash released through downsizing and the rest mainly from pensions and some from equity release. The fall in the amount of help on offer may indicate funds are getting tighter. 10% state giving help has left them less financially secure whilst 20% have said they have made cuts in living standards to help.
If savings are not available, over 55s can release value on their homes through equity release. 4% up from 3% in 2017 of over 55s are expected to do so on 2018. Releasing money “now” when your offsprings need it rather than waiting to you die, is the driving force. The survey found that 49% might consider this type of funding. It is strongly recommended that anyone takes independent financial advice before considering this option.
Is it fair?
There is nothing wrong in helping your loved ones, most of us will do it if we can afford it. But many can’t. For nearly half of potential buyers without access to parental or other help, the prospect of getting on the housing ladder is only dream, with little chance of success. Some providers, by giving help risk leaving themselves short of funds in retirement.
The root of the issue, lies with availability. New home construction for many years under all flavours of governments has fell short of needs. Click on this link to refer to our related article.