Parents will fund 25% of all property transactions this year, providing deposits for over 300,000 mortgages, according to Legal & General. The insurance giant said that the Bank of Mum and Dad will lend their children £5 billion in 2016 to help them get on the property ladder. This makes the Bank of Mum and […]
Parents will fund 25% of all property transactions this year, providing deposits for over 300,000 mortgages, according to Legal & General.
The insurance giant said that the Bank of Mum and Dad will lend their children £5 billion in 2016 to help them get on the property ladder.
This makes the Bank of Mum and Dad the equivalent of a top 10 mortgage lender in the UK.
Nigel Wilson, CEO of Legal & General, said: “The Bank of Mum and Dad plays an increasingly vital role in helping young people take their early steps on the housing ladder.
“But the generosity being displayed by UK families doesn’t make up for intergenerational unfairness – younger people today don’t have the advantages the baby-boomers had, including cheap housing that delivered windfall gains.”
However, he said that relying so heavily on the Bank of Mum and Dad risked increasing inequality as many young people today are not lucky enough to be able to access parental support when buying a home or can’t afford to buy even with parental help.
“We have a supply-side problem in housing – we are simply not building enough houses. We need to build more, especially as the Bank of Mum and Dad could soon start to experience a funding crisis of its own,” he added.
According to Legal & General, London is already at a “tipping point” with 51% of average household net wealth going towards helping their children buy a property.
In the South East, the average family contribution towards a loved one’s home purchase will cross the 50% mark in 2025, while for the East of England this will happen in 2028.
This situation is even worse for those families that live in a region with lower household wealth, but whose children are looking to buy a property in one of the more expensive regions. In 2016, those families that live outside of London, but whose children or grandchildren do live in the capital will dedicate an average of 64.1% of their household net wealth to helping them onto or up the property ladder.
Wilson said that a “new innovative” approach to house building was necessary to end the reliance on the Bank of Mum and Dad.
“We need to modernise housebuilding and make it more efficient so that we can increase supply and quality for all forms of tenure, and all income and age groups, from students to pensioners. Institutions like Legal & General can regenerate not just residential housing, but the towns and cities in which the homes are built. Infrastructure, jobs and local economic growth are all key to creating thriving communities where people want to live,” said Wilson.
