"While the Bank of Mum and Dad is playing a clear and present role for many buyers, it remains a symptom of a broken housing market."
56% of first-time buyers aged under 35 are receiving financial support from the Bank of Mum and Dad, according to new research from Legal & General.
Nearly three-quarters (71%) of these new homeowners said they would not have been likely to buy without financial help from family or friends. Instead, they would have to delay their housing plans by four years on average.
The research follows earlier findings from Legal & General, which showed that the Bank of Mum and Dad is stepping in to support loved ones as the economic impact of Covid-19 takes hold. A third (33%) of all people looking to buy in the next five years plan on getting financial help from family or friends.
Legal & General estimates that in 2020, BoMaD ‘lenders’ will play an active role in 73,160 property purchases among those aged under 35. That’s only an 8% decrease from 2019 transaction levels (79,631), despite wider property purchases collapsing by nearly half during Q2 2020. The research also shows that the Bank of Mum and Dad is lending on average £19,000 to first-time buyers under the age of 35, with 21% of respondents in this age bracket saying they received more than £30,000.
In total in 2020, the under 35s will receive £1.36bn in BoMaD contributions, helping them to purchase £18.11bn worth of property. However, not all first-time buyers will receive the funding as a gift, with 30% expected to pay at least some of it back.
Financial support for home purchases by those aged over 35 will also account for £2.14bn, or 61% of the Bank of Mum and Dad’s total lending in 2020. While it’s likely that this high figure is in part due to older first-time buyers are looking for larger, more expensive properties as a home for their growing families, BoMaD will still be behind 101,800 transactions among the over-35s – that’s around 30,000 more BoMaD supported purchases than in the under 35s age group. Even 9% of people aged over 55 planning to buy said they would have had to delay their purchase without financial support from BoMaD.
Even with so many relying on the Bank of Mum and Dad for funding, and the country facing up to the economic implications of Covid-19, BoMaD lenders themselves are still eager to help out. Nearly 74% of those who have seen their incomes fall during the pandemic say the crisis has made them no less willing to help loved ones onto the housing ladder.
Nigel Wilson, CEO at Legal & General, commented: “The Bank of Mum and Dad’s role in Britain’s housing market is ubiquitous. Across the UK, parents, grandparents, family and friends are digging into their pockets to help young, hopeful buyers and even growing families to make their housing plans a reality. These generous lenders are often funding most or all of the deposit buyers need to step onto or up the ladder.
“But while the Bank of Mum and Dad is playing a clear and present role for many buyers, it remains a symptom of a broken housing market. Thousands of people simply don’t have a Bank of Mum and Dad to rely on. For those that do, generous family members are still having to draw on retirement savings and rainy day funds even as the country experiences its most significant economic challenge since the Second World War.
“We must address the UK’s ongoing housing crisis. Only then will we be able to tackle the issue of affordability. Britain’s housing sector is a critical engine behind the country’s economic growth and we need a strong property market now more than ever to drive the economic recovery from Covid-19. Legal & General is at the forefront of this ambition as we continue to invest in delivering housing for all ages, social groups and tenures throughout the UK.”