According to the latest research and forecasts from Legal & General and the Centre for Economics and Business Research, it is estimated that 27 per cent of buyers will receive help from friends or family this year, with the Bank of Mum and Dad (BoMaD) lending the equivalent of £5.7 billion alone.
Legal & General say that almost 317,000 housing transactions this year would rely on at least some parental help, an increase of just over 18,000 since 2017, with London seeing the highest number of contributions.
Those most likely to receive BoMaD assistance are aged 35 and under, however the stats reveal that 20 per cent of homeowners aged between 45 and 55 are now also relying on parental financing.
But parents are starting to feel the pinch, with the research finding that the average contribution this year will be £18,000, down 17 per cent from 2017. Total lending has reduced from its height at £6.5 billion in 2017 to £5.7 billion in 2018. This is, however, still an overall increase from 2016, where lending peaked at £5 billion.
While securing funding from the Bank of Mum and Dad is a popular way for millennials to meet stricter mortgage criteria and cope with rising property prices, fresh results suggest that it may not be the most affordable method of borrowing.
Crowdfunding property service UOWN recently surveyed 2,500 parents in Britain who have loaned their children money for a home found that just over a quarter (25.6 per cent) would consider charging interest on a loan. The survey found that the average Bank of Mum & Dad interest rate was 4.3 per cent, which comes in much higher than the standard bank interest rates of 2 per cent or lower – meaning that parents could begin to profit greatly from giving their offspring a foot up on the property ladder.
Nigel Wilson, Group Chief Executive at Legal & General, said: “The Bank of Mum and Dad remains a prime mover in the UK housing market, and will lend the best part of £6 billion to buyers this year, with over 315,000 transactions being underpinned by parental help. However, it’s clear that households are feeling the pinch, as BoMaD contributions have reduced by an average of 17 per cent from nearly £22,000 to a still very generous £18,000.
“The fact that in 2018, 1 in 4 housing transactions in the UK will be dependent on the Bank of Mum and Dad, while hard-pressed parents are finding it more difficult to provide the funds to help their family with deposits, will further exacerbate the UK’s housing crisis. We need more homes for the young, old and families alike.”