The so-called Bank of Mum and Dad will lend 23% more funds in 2017, putting it on a par with the UK’s ninth largest mortgage lender.
Research by Legal & General and economics consultancy Cebr shows that parents providing housing funding for their children will breach the £6.5 billion mark this year, up from £5 billion in 2016.
The Bank of Mum and Dad will provide deposits for over 298,000 mortgages, helping others to purchase homes worth £75 billion.
According to the report, these figures indicate a symptom of a ‘broken housing market’, rather than increasing generosity from the nation’s parents.
It stresses that there is a supply-side crisis in the UK and there is a critical need to build more homes, across all tenures and all forms of construction, to satisfy demand.
The study also found that a third of prospective homeowners received financial help to buy from friends and family last year – a figure which will jump to around 42% in 2017.
Unsurprisingly, millennials are the biggest recipients of parental funding, with 79% of Bank of Mum and Dad assistance going to people under the age of 30.
The Bank of Mum and Dad will actually fund less purchases in 2017 than in 2016 (a -2.5% decrease from 305,900 to 298,300) – but only because overall housing market transaction volumes are down.
What’s more, 76% of Bank of Mum and Dad assistance goes towards the deposit – just 4% goes solely on mortgage payments.
“The growing role of the Bank of Mum and Dad in supporting young people get onto the housing ladder signifies that the UK property market is simply not building enough homes,” comments Bill Hughes, head of LGIM Real Assets.
“This is not sustainable and as an industry we need to work together to fix the housing market so that we are providing housing in areas which are well connected and where people want to live.”
“The right approach is to regenerate not just residential housing but the totality of the built environment of towns and cities in which the homes are built. Infrastructure, local economic growth and jobs are all key to creating thriving communities.”
James Lidgate, director of housing for Legal & General Capital adds: “This research further highlights that as an industry we need to diversify the housing market in order to keep up with the UK’s housing demands.”
“There is no single solution to housing – it is about all tenures and all forms of construction. Good quality, well connected housing is critical to supporting the UK’s economic position and fuelling future growth.”