As lenders’ names go, The Bank of Mum and Dad is rather appealing. There’s instant brand awareness, the prospect of small or non-existent interest rates, and the likelihood that financial negotiations will end with a hug and a few happy tears.
I’m a member of this institution. When I moved back up North following 14 years in London, I found the perfect house outside of Manchester. But I couldn’t sell my flat in the capital and was leaking money left, right and centre. A bridging loan was out of the question, as was anything resembling a deposit. So my Dad stepped in, loaned me a sizeable sum, and it all ended happily.
That was seven years ago. I’m still in the property I bought with my father’s help and my London pad is a distant memory. And I’m not the only one who has benefited from parental largesse.
Research out today reveals that The Bank of Mum and Dad now funds more than a quarter of all UK property transaction, putting it on a par with the 9th largest mortgage lender in the country (up from number 10 last year). That ranks the parental bank alongside Virgin Money and Yorkshire Building Society in terms of gross lending, and ahead of Clydesdale Bank.
Legal & General, which together with Cebr, the economics consultancy, published the study, predicts that The Bank of Mum and Dad will lend over £6.5 billion in 2017, up from £5 billion last year, providing deposits for around 298,000 mortgages, and helping others to purchase homes worth £75 billion.
Nigel Wilson, chief executive of Legal & General, said: ‘The Bank of Mum and Dad continues to grow in importance in helping young people take their early steps onto the housing ladder. The inter-generational inequality that creates the demand for this funding continues to widen – younger people today don’t have the same opportunities that the baby boomers had, including affordable housing, defined benefit pensions and free university education. Parents want to help their kids get on in life, and the Bank of Mum and Dad is a testament to their generosity, but it is also a symptom of our broken housing market.
‘The UK is experiencing a supply-side crisis in housing – we are simply not building enough houses. We need to build more homes for the young, old and families alike – more quickly and cost effectively.’
Legal & General also found that the average mortgage help given by Mum and Dad has soared from an average of £17,500 in 2016 to £21,600 in 2017 – an increase of 23 per cent. And, not surprisingly, millennials are the biggest recipients – 79 per cent of funding goes to people under the age of 30.
A separate study, also out today, shows that young people are turning to their parents for financial help with the cost of living. According to Gocompare.com, 17 to 25-year-olds receive an average of £123.60 a month (£1,483.20 a year) to help towards their expenses. The Bank of Mum and Dad picks up bills for food, mobile phones, clothing, cosmetics and transport – as well as treats.
A fifth of parents admitted that supporting their kids was putting a real strain on finances and their relationship with their children. For anyone with a young family worried about this happening to them, I suggest reading today’s Spectator Money article by Rebecca O’Connor. You won’t regret it.
Helen Nugent is Online Money Editor of The Spectator