UK parents will lend or give more than £5billion over the course of 2016 to help their children get onto or move up the property ladder, according to research published by Legal & General today.
The insurer said that the “bank of mum and dad” would be involved in a quarter of all property transactions this year, and was the financial equivalent of a top 10 British mortgage lender. Legal & General’s study found that around 300,000 buyers would benefit from a parental gift or loan in 2016 worth on average £17,500 – roughly 7% of the typical purchase price.
In most cases, the contributions are outright gifts but around 20% are interest-free loans while 5% are loans with interest.
Nigel Wilson, CEO of Legal & General, said: “The bank of mum and dad plays an increasingly vital role in helping young people take their early steps on the housing ladder. 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.
Wilson added: “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.”