Reliance upon Bank of Mum and Dad hits record high

The reliance of first-time buyers upon the Bank of Mum and Dad to purchase a home has hit a record high, according to new research.

The Social Mobility Commission reveals today that the proportion of first-time buyers relying on inherited wealth or loans from their parents to climb onto the housing ladder is at a historic high – and that trend is set to continue.

The Commission warns that the increasing trend will have damaging consequences for social mobility as young people on lower incomes are finding it almost impossible to get a foot on the housing ladder.

Analysis of government and housing market data by researchers from the University of Cambridge and Anglia Ruskin University has found that the proportion of young people embarking on home ownership has fallen dramatically.

For 25- to 29-year-olds, home ownership has fallen by more than half in the last 25 years from 63 per cent in 1990 to 31 per cent most recently. Many of those who do manage to buy eventually can only do so at an older age.

Over a third of first-time buyers in England (34 per cent) now turn to family for a financial gift or loan to help them buy their home compared to 1 in 5 (20 per cent) 7 years ago.

It is not only first-time buyers who benefit from parental support – over 1 in 10 (12 per cent) of existing owners are also benefitting from a gift or a loan when buying a new home.

With housing tenure remaining one of the main ways in which wealth is held and transferred through generations, the report warns that difficulties in buying homes are becoming a barrier to improving social mobility in the UK.

The report also finds that first time buyers who receive money or a loan from their parents can buy 2.6 years earlier than those who do not. In London, this figure rises to 4.6 years. The average income of households in London who rely on support from parents is £40,900 compared with £42,400 for those who do not.

Researchers project that the number of future first-time buyers will rise slightly in the short term, then fall gradually over the next 25 years. The speed and the extent of the rise and fall will be determined by the robustness of the economy.

The Rt Hon Alan Milburn, chair of the Social Mobility Commission, says: “Home ownership helps unlock high levels of social mobility but it is in free-fall among young families. Owning a home is becoming a distant dream for millions of young people on low incomes who do not have the luxury of relying on the bank of mum and dad to give them a foot up on the housing ladder.”

“It is welcome that the government recognises the growing problem people face in getting on the housing ladder,” Milburn adds. “A major national effort is needed to expand opportunities for home ownership and will require more radical action on housing supply.”

1 in 10 rely on Bank of Gran and Grandad for deposit

13th March 2017

1 in 10 first-time buyers now rely on the Bank of Gran and Grandad to help find the funds for their deposit.

New research from Santander Mortgages highlights the increasing dependence on grandparents for getting onto the housing ladder, with 8 per cent relying on them for financial help, a four-fold increase compared to five years ago.

Since 2012, there has been a large shift towards turning to family for help in becoming a homeowner. Of those currently looking to buy, 32 per cent will use a family loan to fund a deposit, a sharp increase from the 13 per cent of current homeowners who once asked for financial help from their families.

The bank’s study, which took a snapshot of FTB attitudes towards the property market, revealed that FTBs estimate their deposit will be, on average, 32 per cent of their salary. However, a significant one in five (19 per cent) expects to pay more than half of their annual income on their deposit.

In comparison, current homeowners estimated that when they bought their first home, their deposit was an average of 20 per cent of their yearly income, with only 5 per cent of them spending more than half of their salary on a deposit.

Miguel Sard, Managing Director of Mortgages, Santander UK says: “Despite having to use alternative income streams over and above their salary – such as relying on the Bank of Gran and Grandad – today’s first time buyers are demonstrating resilience and determination to achieve their home ownership goals. The purchase of a first property still remains high on the priority list for many people across the UK and it’s encouraging to see so many first time buyers feeling positive about the year ahead.”

Bank of Mum and Dad: We pay rents, too!

21st July 2016

The Bank of Mum and Dad, a major contributor to the UK housing market in the last year, has branched out into a new area: rent.

450,000 adults in the UK need their parents’ help to meet their monthly rental payments, according to new research from Shelter. The housing charity surveyed almost 4,000 adult renters to find out how many get help from their mum and dad. While the proverbial “bank” has helped a lot of people get on the housing ladder, it is increasingly getting involved with making ends meet at a much earlier stage of the shift from private tenant to homeowner.

11 per cent of adults between the age of 18 and 24 now receive financial support from their parents to meet their rent, found the study, with that figure falling to 8 per cent among those aged between 25 and 34. Shelter estimates that the total amount spent on children’s rents is around £850 million a year, with £150 million a year also being spent on moving costs.

“With housing costs sky high it’s not surprising that the Bank of Mum and Dad is no longer just relied on for help with buying a home, but renting costs too,” Campbell Robb, Shelter’s chief executive, told The Observer. “We know that the majority of private renters are forking out huge proportions of their income to cover the rent each month, and that’s not even taking into account the extortionate deposits and fees that need to be paid.”

The bank is also a symptom, and partial cause, of the growing divide in the UK housing market, notes the charity, with almost 150,000 renting households at risk of losing their home in the last year, with those at risk not lucky to receive from their mum and dad.

Theresa May has recently addressed the need to deal with the country’s housing deficit in her first speech as the new UK PRime Minister, noting that, if not kept in check, it will continue to push up prices and see the divide betwen those who inherit wealth and those who don’t widen.

“The new prime minister needs to give back hope to the millions of renters being left behind by our housing shortage, by quickly putting in place measures that will build homes people on ordinary incomes can actually afford,” commented Robb.

“Bank of Mum and Dad” will lend over £5bn ths year

3rd May 2016

The “Bank of Mum and Dad” will lend over £5 billion this year to help their children buy houses, making them one of the biggest lenders in the UK.

The nickname may be something of a joke, but the Bank of Mum and Dad has grown to play a serious role in helping young people take their early steps on the housing ladder, at a time when a supply shortage has pushed up values.

Legal & General’s research shows that parents will help to provide deposits for over 300,000 mortgages in 2016, purchasing homes worth £77 billion. Accounting for 25 per cent of all property transactions that take place in the UK market this year, Nigel Wilson, CEO of Legal & General, says the “bank” plays an “increasingly vital” part of the housing market.

“But the generosity being displayed by UK families doesn’t make up for intergenerational unfairness – younger people today don’t have the advantages the baby-boomers had, including cheap housing that delivered windfall gains,” says Wilson. “People will always want to help family members – it is a natural thing to do. 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. 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.”

The Bank of Mum and Dad’s average financial contribution is £17,500 or 7% of the average purchase price, over three quarters of BoMaD purchases – 256,400 of them – will be assisted by the buyer’s parents, with a further 22,500 and 27,000 supported by grandparents and other family members/friends respectively.

57 per cent of Bank of Mum and Dad contributions are gifts, 18 per cent are loans with no interest and 5 per cent are loans with interest.