'Bank of mum and dad' finances 25% of UK mortgage payments in 2016

Parents will lend over £5 billion this year, providing deposits for over 300,000 mortgages and purchasing homes worth £77 billion

Hazel Sheffield
Tuesday 03 May 2016 14:02
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The bank of mum and dad's average financial contribution is £17,500 or 7 per cent of the average purchase price of a home
The bank of mum and dad's average financial contribution is £17,500 or 7 per cent of the average purchase price of a home

The so-called bank of mum and dad will finance 25 per cent of all mortgages in the UK in 2016, making parents as important as one of the UK's top 10 lenders.

Parents will lend over £5 billion this year, providing deposits for over 300,000 mortgages and purchasing homes worth £77 billion, research from Legal & General and financial services group Cebr has shown.

The bank of mum and dad's average financial contribution is £17,500 or 7 per cent of the average purchase price of a home.

Nigel Wilson, CEO of Legal & General, said that parental support was becoming increasingly important to help young people get on the housing ladder because young people don't have the same advantages baby boomers had, like cheap housing.

"Relying so heavily on the bank of mum and dad however risks 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," Wilson said.

"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.

The research shows that three-quarters of family-funded house purchases are funded by parents, with family friends and grandparents also making up the difference.

In London, homeowners with assistance got an average of 6.2 per cent of their property's value from family and friends. That's an average of 51 per cent of the family's net wealth, which poses a risk as parents overstretch themselves to help their children get on the property ladder.

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