The bank of mum and dad has leant 23% more for their children’s property purchases over the past year, which highlights a symptom of the UK’s broken housing market, according to research released by Legal & General (L&G) and Cebr.
The rise in funding by the bank of mum and dad emphasises the supply-side crisis in the UK property market, and the critical need to build more homes across all tenures.
The research found that the bank of mum and dad will lend over £6.5 billion in 2017 – up from £5 billion in 2016, providing deposits for more than 298,000 mortgages and helping their children purchase homes worth £75 billion.
BThe Bank of Mum and Dad is Funding 23% More Purchases than Last Year
The bank of mum and dad is now on par with the ninth largest mortgage lender in the UK – up from ten last year – and will be involved in 26% of all property transactions that take place in the UK market this year.
In 2016, a third of prospective homeowners received financial support to buy a property from friends and family. In 2017, that figure jumps to almost half (42%). The amount of assistance has risen from an average of £17,500 in 2016 to £21,600 in 2017 – an increase of 23%.
The research found that millennials are the biggest recipients of bank of mum and dad funding, with 79% of funds going to people aged under 30-years-old.
The study believes that the bank of mum and dad will fund less purchases in 2017 than in 2016 – a 2.5% decrease – from 305,900 to 298,300, but only because overall housing market transaction volumes are down.
Of all bank of mum and dad funding, 76% is used for the deposit, while just 4% goes solely to mortgage payments.
Parents in the South West are the most generous, providing £30,000 of financial support per transaction on average – even more than London (£29,400). Welsh parents were found to give the least – an average of £12,500.
Good quality, well-connected housing is critical to supporting the UK’s economic position and fuelling growth. If people cannot find affordable housing options that support a good quality lifestyle in places that they want to live, they will go elsewhere and take their skills with them.
L&G is playing its part in housing creation, backing a fast growing pipeline of over 70,000 new homes over the next five to ten years and looking to help provide the UK’s population with high quality, affordable living at all stages in their life cycle. This includes investment in Build to Rent projects.
The Head of LGIM Real Assets, Bill Hughes, says: “The growing role of the bank of mum and dad in supporting young people getting onto the housing ladder signifies that the UK property market is simply not building enough homes. This is not sustainable and, as an industry, we need to work together to fix the housing market so that we are providing housing in areas which are well connected and where people want to live. The right approach is to regenerate not just residential housing, but the totality of the built environment of towns and cities in which the homes are built. Infrastructure, local economic growth and jobs are all key to creating thriving communities.”
James Lidgate, the Director of Housing at Legal & General Capital, also comments: “This research further highlights that, as an industry, we need to diversify the housing market in order to keep up with the UK’s housing demands. There is no single solution to housing – it is about all tenures and all forms of construction. Good quality, well-connected housing is critical to supporting the UK’s economic position and fuelling future growth.”