A raft of recommendations into how the mortgage industry can support the Bank of Mum and Dad to help first-time buyers onto the property ladder have been unveiled today.
The Building Societies Association (BSA) has called for more innovative products to be created to enable parents and grandparents to loan or gift money to family members.
It also wants building societies to provide clearer communication to break through jargon to help explain all the options to the generations.
And it wants regulatory and tax barriers to be broken down to help free up more lending to enable property wealth to be put to good use.
The Building on the Bank of Mum and Dad report had recognised how the Bank of Mum and Dad already provides billions of pounds to help younger homebuyers.
It said nine in ten building societies expected this form of financing to play an increasing role in helping first-time buyers over the next five to ten years.
But now it wants the right support to enable the role to grow without jeopardising the long-term financial wellbeing of older generations.
Support between generations
The report also highlighted how the Bank of Mum and Dad wasn’t just about family members handing over cash in the form of gifts and loans – many customers wanted support between generations through guarantees or using their property or savings as security.
Indeed, it also identified equity release or downsizing as ways to support the younger generations.
Robin Fieth, chief executive of the BSA said: “Home ownership remains a fundamental ambition for the majority of people.
“Against the challenging backdrop of high prices, a woefully inadequate supply of homes and a growing intergenerational divide, new ideas and strong debate are essential.
“Family help – the so-called ‘Bank of Mum and Dad’ – is great for those fortunate enough to have this option, but innovations in underwriting could help all potential first-time buyers.”
Among its findings the report discovered:
- 86% of people wanted to own their own home, but the financial challenges facing first-time buyers meant many thought they would not achieve this aspiration.
- In 2017 there were 360,000 first time buyers – but the minimum should be nearer 450,000. The ability to buy was increasingly concentrated on dual-earning households and those with higher incomes.
- More than half of aspiring first-time buyers expected the Bank of Mum and Dad to support them onto the housing ladder.
Bob Pannell, co-author of the report, said: “Our young people face huge challenges in buying their first homes. Families instinctively want to help, and it’s the job of lenders, regulators and Government to ensure that they have more opportunities to do so in a sustainable way.”
Response to report
The recommendations have been welcomed by the Melton Building Society and it highlighted one of its own products which could support families in this situation.
Martin Reason, chief executive of the Melton said: “In today’s challenging housing market flexibility in underwriting is essential to help first time buyers with affordability and deposits by harnessing the power of the family’s financial situation.
“For example, our Family Assist self-build mortgage allows parents to provide the deposit and have it returned on completion of the build, allowing younger borrowers the opportunity to build their own property.”
