Bill to the Bank of Mum and Dad could reach £6.5bn
A recent report has suggested that the ‘Bank of Mum and Dad’ will be lending their children over £6.5 billion this year in order to help them onto the property ladder. The projected figure is around £1.5 billion higher than the £5 billion loaned by parents to their offspring in 2016, demonstrating an increase of 30% and meaning that more than one in four property transactions in the UK in 2017 will involve parents.
The figure is similar to that lent by the Yorkshire Building Society, the ninth biggest mortgage lender in the UK, and will help fund deposits for more than 298,000 mortgages and property purchases to the value of around £75 billion. The expected average amount lent to children by parents this year will be £21,600, an increase from the 2016 average of £17,000. Almost four out of five (79%) of the recipients will be millennials under the age of thirty.
The greatest average contribution by parents will be seen in the south-west of England, with around £30,000 lent per transaction, with London the second highest at an average of £29,400. At the other end of the scale, parents in Wales will lend an average of just £12,500.
The report has been seen as further evidence of how the housing market in the UK is currently not working as it should. The continuing rise of parental funding to help young people get on the property ladder shows that the problem is worsening, with the exponential growth of the Bank of Mum and Dad’s input in property transactions neither sustainable nor equitable for both the younger generation borrowing the money and the older generation lending it out.
The report also found that only 40% of parents financially support all their children equally: 18% only helped their first-born child, whilst 16% supported their youngest. Whilst most parents were prepared to give their children a certain amount of help towards buying a property, only one in five parents would offer greater assistance if they lived in more expensive areas. In London, however, 40% of homeowners had received financial support from their parents.