The Bank of Mum and Dad (BoMaD) is playing an increasing role in helping people with house purchases. Research by insurance group Legal & General reveals that over the last 12 months 71% of first-time buyers could not have made it onto the housing ladder without financial assistance from family or friends. Were it not for this help the research claims that these new homeowners would have had to delay their housing plans by as much as four years. A third of those looking to buy in the next five years expect to do so with help from family members.
The L&G report shows that over half (56%) of first-time buyers aged under-35s received financial help from their family when buying their property. This will result in over 73,000 properties being paid for with financial support from BoMaD in 2020. Whilst this is 8% down on 2019 the figure is remarkable in the light of covid-19 and the collapse in house sales in the middle part of this year. The research shows that BoMaD will lend an average of £19,000 to first-time buyers aged under 35, with 21% admitting to receiving more than £30,000 in assistance. In 2020 the total lent by BoMaD to this age group will be around £1.36 billion, helping buyers to purchase over £18 billion worth of property. When questioned, only 30% of recipients expected to pay back at least some of the BoMaD loans.
This age group is not the only one to benefit from the Bank of Mum and Dad, with the over-35s also taking advantage of financial help. BoMaD is predicted to lend £2.14 billion to this group in 2020, or 61% of its total expenditure. This equates to 101,800 properties in the over-35s category, a figure which is actually 30,000 more than the younger age group. Even 9% of buyers aged over 55 admitted they would need to delay their purchase without support from BoMaD.
Commenting on the research, CEO of Legal & General, Nigel Wilson, said: “Across the UK, parents, grandparents, family and friends are digging into their pockets to help young, hopeful buyers and even growing families to make their housing plans a reality. These generous lenders are often funding most or all of the deposit buyers need to step onto or up the ladder.”
However, he cautioned that: “…BoMaD…remains a symptom of a broken housing market. Thousands of people simply don’t have a Bank of Mum and Dad to rely on. For those that do, generous family members are still having to draw on retirement savings and rainy day funds…” Mr Wilson went on: “…we must address the UK’s on- going housing crisis. Only then will we be able to address the issue of affordability. Britain’s housing sector is a critical engine behind the country’s economic growth and we need a strong property market now more than ever to drive the economic recovery from COVID-19”.
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