According to research conducted by the financial services group Legal & General, the Bank of Mum and Dad is currently providing unprecedented levels of financial support to the property market. This year, it is projected that families will assist in the purchase of 47% of all homes bought by individuals under the age of 55. This percentage includes not just parents, but also grandparents and siblings. It is expected that family funding will facilitate over 318,000 property purchases, marking the highest number since Legal & General started tracking family lending in 2016.
The average amount of money given by each family is forecasted to reach £25,600 this year, and the total lending is predicted to increase to £8.1 billion by 2023, a 50% surge from 2020. The total value of properties purchased with family assistance is estimated to reach £124.6 billion this year.
Bernie Hickman, the CEO of Legal & General Retail, stated that family wealth is increasingly becoming a prerequisite for homeownership, effectively barring certain groups from the housing market for extended periods of time. The study demonstrates that the value of family contributions has risen by more than a quarter compared to pre-pandemic levels.
Furthermore, Legal & General’s research suggests that family-funded home purchases will continue to rise in the future. It is anticipated that family contributions will climb to an astonishing £10 billion by 2025, supporting 357,200 home purchases annually.
This growing reliance on financial support from family members underscores the challenges faced by aspiring buyers who lack access to such assistance. The majority of buyers who receive support from their families state that without this financial help, they would have to postpone their home purchase. More than one in five individuals claim that they would need to delay their purchase by over five years, and 10% of first-time buyers would be unable to buy a home without family assistance.
Kieran Hopkins, a 26-year-old who recently bought his first home in Cardiff, emphasizes the importance of family support in accelerating his entry into the property market. Hopkins believes that without his parents’ financial backing, he and his girlfriend would have had to wait several more years before they could afford a joint deposit. He expresses the relief and excitement of achieving this significant milestone in life, highlighting the intrinsic value of homeownership compared to renting.
According to separate analysis conducted by Hamptons and Skipton Building Society, 32% of mortgaged first-time buyers in the UK received family support for their deposit this year, up from 30% in 2022. Family assistance enables first-time buyers to make larger deposits and purchase more expensive homes. The average first-time buyer who received family help paid £257,290 for their home this year, £6,500 more than those without additional contributions.
Aneisha Beveridge, head of research at Hamptons, notes that as homeownership rates decline across generations, younger parents today are less likely to own homes than their predecessors, limiting their ability to release equity to pass on to their children. The potential for higher interest rates further exacerbates the gap between those with and without family support.
Charlotte Harrison, interim chief executive of home financing at Skipton Building Society, adds that high property prices, rising rents, and the cost of living squeeze make it almost impossible for people to save for a house deposit without assistance. Family support significantly enhances first-time buyers’ purchasing power and allows them to enter the property ladder much earlier than they would on their own.
Overall, family contributions constitute an average of 63% of a first-time buyer’s total deposit, according to Hamptons. More than a third of first-time buyers with family support are able to put down a deposit of 20% or more, double the share of those without family assistance.
Anthony Codling, head of European housing and building materials research at RBC Capital Markets, emphasizes the significance of the Bank of Mum and Dad, stating that it should not be underestimated as a barrier to homeownership. Codling notes that affordability calculations often fail to account for the amount of money individuals receive from their families. He believes that the intergenerational transfer of wealth, particularly from parents and grandparents, plays a crucial role in achieving homeownership.
In addition to parents, siblings are also increasingly providing financial support to first-time buyers. Skipton Building Society data indicates that this year, siblings have contributed to a record 11% of first-time buyer deposits, compared to just 5% five years ago. Grandparents currently account for 8% of contributions, while parents remain the primary source of support, making up 72% of family-funded deposits.
In conclusion, the Bank of Mum and Dad is playing a prominent role in the property market, with families providing substantial financial assistance to aspiring homeowners. The increasing reliance on family support highlights the challenges faced by individuals without access to such help. However, family contributions enable first-time buyers to make larger deposits and purchase more expensive homes, giving them a head start on the property ladder.
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