Another week, another bit of gloomy housing news for anyone who’s not an oligarch or an opportunistic landlord. If you’re scrimping and saving for a deposit on your first home, you probably won’t like what you’re about to read.
The so-called 'bank of mum and dad' will lend their children 30% more money to get on the housing ladder than they did last year, according to new research. For anyone who doesn’t come from a wealthy family (namely, most of us), who’s saving to buy their first property, this is pretty demoralising.
Parents will lend their adult children £6.5bn in 2017, up from the £5bn loaned last year, the research by Legal & General and economics consultancy Cebr found, reported The Guardian. This means parents will be involved in over a quarter of all property transactions in the UK.
The borrowed money will fund properties worth around £75bn, including deposits for more than 298,000 mortgages, the report said.
If the bank of mum and dad were a real bank, it would be among the top 10 biggest mortgage lenders in the country. (Yorkshire Building Society also lends about £6.5bn each year and is the ninth biggest lender.)
Individuals benefiting from their parents’ cash will receive £21,600 this year on average, up from an average of £17,000 last year. Unsurprisingly, given the UK’s huge generational wealth inequality, millennials will benefit most, with 79% of the money going to the under 30s.
Parental contributions will be highest on transactions in the south-West of England (£30,000) and London (£29,400), and lowest in Wales (£12,500) according to the report. In London, 40% of all homeowners had received financial help from their parents to buy their property. (Frankly, we’re not surprised.)
Interestingly, most parents don’t give their children equal help when it comes to buying property. Just 40% said they did, with 18% only helping their eldest child and 16% assisting only the youngest.
It hardly needs spelling out, but Legal & General said this reliance on the bank of mum and dad is further evidence that the UK housing market is broken – and the problem is only getting worse.
“Transaction volumes are down in the housing market, but [parental] funding is growing exponentially. This is not a good thing, nor is it sustainable or equitable for our parents [the lenders] or young people [the borrowers],” said Nigel Wilson, the company’s chief executive.
“The intergenerational inequality that creates the demand for [parental] 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,” Wilson added.
While parental lending “is a testament to [parents’] generosity,” Wilson said, “it is also a symptom of our broken housing market”. The UK isn’t building enough houses to satisfy demand and more needs to be done to address the problem – fast, he added.