Parents are still a vital part of the house buying market but their level of lending to their offspring is not sustainable at one on four buyers, according to a new report.
It is forecast that the so called Bank of Mum and Dad will lend an average of £18,000 to their children, amounting to almost 317,000 transactions, according to research by Legal & General.
While this is down from the £21,600 lent last year, one in four first time buyers will still get help from parents to buy a home, although the fall suggests the Bank of Mum and Dad may be feeling the pinch, says the financial services firm.
Overall, this amounts to 27% of home buyers, up from 25% last year. But, while some £6.5 billion was lent this way in 2017, this is forecast to drop to £5.7 billion this year.
The research also shows that where buyers live has a big impact on how much they rely on their parents for help. In London, the average parental contribution is £31,000 compared with £11,000 in Scotland.
More buyers in London, some 41%, receive help from the Bank of Mum and Dad than in any other area but this is probably due to house prices being much higher.
While those aged under 35 are most likely to get help from their parents, with nearly three in five doing so, some older home buyers also rely on the Bank of Mum and Dad, with 20% of those aged between 45 and 55 receiving help.
‘People are feeling a bit of a pinch around the economy and therefore we’re seeing pretty much a national trend outside of London for less to be given,’ said L&G chief executive Nigel Wilson.
‘The volume of transactions depending on Bank of Mum and Dad funding keeps on growing, even as parents find it harder to provide as much money for the deposit,’ he pointed out, adding that it is not sustainable for parents and young people to be so co-dependent when it comes to buying a home.
‘The fact that in 2018 one in four housing transactions in the UK will be dependent on the Bank of Mum and Dad, while hard-pressed parents are finding it more difficult to provide the funds to help their family with deposits, will further exacerbate the UK’s housing crisis. We need more homes for the young, old and families alike,’ he concluded.
