‘Bank of Mum and Dad’ predicted to lend £6.5bn this year

Emphasising 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 provide deposits for more than 298,000 mortgages and help their children purchase homes worth £75bn.

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.

The head of LGIM Real Assets, Bill Hughes, said: “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, added: “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.”