It’s not just the banks using tough lending criteria for their mortgage applications, the Bank of Mum and Dad is becoming a stickler for rules as well.
That’s according to equity release adviser, Key, which has uncovered evidence one in five parents helping their children with major financial steps set out terms and conditions on how they expect handouts to be spent.
The Bank of Mum and Dad has become established as one of the UK’s biggest lenders when it comes to helping young people on to the property ladder.
But Key’s study suggests it is not only growing as a lender, it is also becoming more responsible.
Almost half of the over-55s it questioned who were planning to help adult children said they wanted to ensure the money was not squandered. And they were also keen to guarantee their grandchildren benefited from the money.
A fifth said they would submit specific rules on how money was spent and over a third said they would discuss what the cash was used for before they paid it out.
A number of the potential Bank of Mum and Dad lenders said they wanted to make sure their children sought financial advice on how to spend or invest their money.
Cutting back
And it’s no wonder many are keen to tighten their lending, with Key’s research also discovering many parents have had to cut back on their own finances in order to support their children’s step onto the housing ladder.
Indeed, 78% said they were worried helping their children would leave them in financial trouble later in life.
Will Hale, CEO at Key said: “The Bank of Mum and Dad is firmly established as a part of the mainstream UK lending market and more and more parents are banking on helping children if they can afford to.
“However, as with any other lender, they have to set limits on how much they can afford to lend and on what the money is used for.
Financial advice
“Stipulating that children should receive financial advice is a sensible move as good advice is key to making sensible financial decisions.
“That applies to the Bank of Mum and Dad itself as they should not lend money without considering the short, medium and long-term financial implications for themselves.”
