08 May 2017
The 'Bank of Mum and Dad' continues to grow in importance in the UK housing market.
A study by Legal & General found BoMaD will lend a staggering £6.5billion to young people across Britain to fund home purchases this year – up from £5billion in 2016.
This soaring level of lending from family and friends in 2017 puts BoMaD on a par with the ninth biggest mortgage lender, Yorkshire Building Society.
Legal & General’s research, carried out with economics consultancy Cebr, showed the vital role family and friends play in helping young adults get on or move up the property ladder.
BoMaD will provide deposits for more than 298,000 mortgages this year, helping to purchase homes worth £75billion. That’s 26% of all property transactions in the UK market.
Assistance from parents and friends has risen from an average of £17,500 in 2016 to £21,600 in 2017 – an increase of 23%.
But Legal & General revealed the level of help which buyers get varies across the country.
The average BoMaD contribution in Scotland is £15,500, with 29% of home buyers receiving assistance from relatives and friends.
Just over a quarter of UK home owners said they received help to buy. For the under-35s, though, that rose close to two thirds (62%). Increasingly, it’s the only way for young adults to get on the housing ladder.
The proportion of prospective buyers who expect to get help from family or friends for their property purchase in the future has risen significantly – from a third in 2016 to more than four in 10 this year.
With mortgage rates at record lows, there are few buyers who struggle to make repayments. Yet requirements for large deposits mean more than two thirds (69%) who received help said they couldn’t have afforded to buy without it.
BoMaD's work doesn’t end there, though, according to Legal & General.
Unable to buy, many people are renting for longer. The financial services company said that, in turn, is pushing up demand and prices. As a result, family and friends often end up covering some rental costs.
Almost 10% of renters in the UK received assistance from family and friends to pay their rent. One in 10, meanwhile, got help for their security deposit, 6% with moving expenses and 5% with letting agent fees
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