The concept of the “bank of mum and dad,” where individuals rely on parental assistance to enter the housing market, has long been a significant factor in the UK housing industry. However, due to ongoing financial pressures, other family members, including siblings, are now being called upon to provide support. This newly dubbed “bank of family” is expected to play a crucial role in financing a record number of home purchases this year.
Recent reports reveal that persistently high housing costs have led aspiring homeowners to seek assistance from parents, grandparents, and increasingly, siblings, in order to secure a deposit. Although house prices have started to decline, rising mortgage rates have made monthly payments more burdensome, likely contributing to the increased reliance on family support. According to Legal & General, it is estimated that relatives will contribute to 318,400 property purchases in the UK in 2023, with 47% of those involving buyers under the age of 55. The research suggests that family members will provide a total of £8.1 billion towards these transactions, averaging at £25,600 per purchase. Of the total, 186,700 homes are expected to be bought with assistance from parents, 39,800 with funds from grandparents, and 91,900 with funds from other family or friends. It is important to note that not all assistance comes in the form of direct financial contributions; many buyers also live with their parents or other family members while saving up for a down payment.
The value of family financial support has been growing steadily over the years, except for a dip during the COVID-19 lockdowns. Legal & General anticipates that family contributions will rise to £10 billion by 2025. Another study conducted by property firm Hamptons found that while parents remain the primary source of support for first-time homebuyers, other family members are increasingly stepping in to help. This year, 32% of first-time buyers received assistance from family members for their deposits, with 72% of that assistance coming from parents, as per an analysis of mortgages granted by Skipton building society. This marks a decrease from 80% in 2018. Siblings were the next most likely source of assistance, accounting for 11% of cases compared to 6% six years ago.
Aneisha Beveridge, the head of research at Hamptons, raises concerns about the sustainability of the bank of mum and dad. She points out that today’s younger parents are less likely to be homeowners themselves, limiting their ability to provide financial support through equity withdrawal. Consequently, first-time buyers are increasingly turning to other family members to boost their deposits. Brothers and sisters, who are often existing homeowners, are stepping forward to help their younger siblings take their first step onto the property ladder.
These figures underscore the challenges faced by those who do not have the option of relying on family assistance to purchase a home. More than one in five first-time buyers stated that without such support, they would need to delay their purchase by more than five years, and 10% said they would not be able to buy at all.
Bernie Hickman, the CEO of Legal & General Retail, stresses the growing importance of family wealth in achieving homeownership while noting the financial strain it places on the giver. He highlights the need for proper financial advice before making such significant gifts, as dipping into savings and pensions can compromise the givers’ own retirement incomes. Hickman also warns that a housing system heavily reliant on gifted deposits not only perpetuates inequality but also presents risks for future generations.
In conclusion, the bank of mum and dad has expanded to include other family members, forming the bank of family. This trend reflects the ongoing struggles with housing affordability and rising mortgage rates, leading individuals to seek support from their relatives. The figures demonstrate both the significant impact of family assistance on housing purchases and the challenges faced by those who lack access to such support. It is important to address these issues to create a housing market that is more equitable and sustainable in the long term.
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