Bank of Mum and Dad will contribute to 47% of house purchases this year

The Bank of Mum and Dad is pouring record levels of cash into the property market this year, new analysis suggests. 

This year alone, families are expected to support 47 per cent of all homes purchased by buyers under the age of 55, according to research by the FTSE 100 financial services group, Legal & General.

As well as parents, that figure also includes money from grandparents and even siblings.  

Family funding is expected to support more than 318,000 property purchases, the highest number since L&G began tracking family lending in 2016.

Helping hand: Financial aid from family is set to give £8.1 billion to homebuyers, and support 47 per cent of all homes purchased by buyers under the age of 55

Helping hand: Financial aid from family is set to give £8.1 billion to homebuyers, and support 47 per cent of all homes purchased by buyers under the age of 55

L&G says the average amount of money given by each family is expected to hit £25,600 this year, while total lending is expected to climb to £8.1 billion in 2023, up 50 per cent on 2020.

The total value of properties bought with family assistance is predicted to reach £124.6 billion this year.

Bernie Hickman, chief executive of L&G Retail said: ‘Family wealth is increasingly becoming a prerequisite for homeownership, effectively locking some groups out of the housing market for years while they save for deposits, or even altogether.

‘While family gifting has always played a prominent role in the UK housing market, our study shows that the value of those contributions has risen by more than a quarter on pre pandemic levels.’

L&G’s research suggests that family-funded home purchases will only increase in the future.

Family contributions are set to climb to a staggering £10 billion by 2025 and support 357,200 home purchases per year.

Rising influence of ‘Bank of family’
Year No of purchases supported by family Value of family gifting/lending  Value of properties purchased with family funds
2016 304,300 £5.34 billion £77.10 billion
2017  317,300 £6.87 billion £80.17 billion
2018  316,600  £6.70 billion £83.91 billion
2019  225,400  £6.39 billion £60.39 billion
2020  239,400  £5.44 billion £68.90 billion
2023  318,400  £8.14 billion £124.63 billion
Source: Legal & General’s 2023 Bank of Family research

This increasing reliance on financial support from family members underlines the challenges faced by aspiring buyers who don’t have access to this support. 

The majority of buyers who have received support from family said they would have to delay their home purchase without the financial help. 

More than one in five said they would have had to delay their purchase by more than five years and one in 10 first-time buyers would not be able to buy a home without family assistance.

Kieran Hopkins, 26, bought his first home in Rumney in the city of Cardiff earlier this year thanks to his parents supporting him by funding half his deposit.

He says family support has essentially fast-tracked him on to the property ladder.

Leg-up: Kieran Hopkins, 26, has managed to buy this year in Cardiff with the help of his mum and dad

Leg-up: Kieran Hopkins, 26, has managed to buy this year in Cardiff with the help of his mum and dad

‘I think I would’ve at least had to wait another few years to put a joint deposit down with my girlfriend,’ says Kieran.

‘We needed to have enough behind us to ensure our initial fixed mortgage repayments weren’t too cumbersome.’

The excitement of owning is mixed with relief at having ticked off one of life’s big milestones, according to Kieran.

‘The alternative was to keep renting,’ he says. ‘I started to consider moving back in with parents and living between there and my girlfriend’s, although that would’ve been very much living out of a bag. 

‘I feel it’s important to own your own home as you’ve got something tangible that you can call your own. 

‘After renting for so many years I just didn’t think it was feasible any more to pay someone else’s mortgage when I can afford to pay for my own.’

Despite higher interest rates, Kieran says the mortgage is actually costing less than what he was paying in rent each month.

‘Higher mortgage rates were always going to be a concern, adds Keiran, ‘but we were lucky to fix in a rate earlier this year before the rates started rising again. 

‘As it stands, I will actually be paying less than the monthly rent I was paying previously.’

Quantifying the extra leg-up 

Separate analysis from Hamptons and Skipton Building Society found that 32 per cent of mortgaged first-time buyers across the UK received family support towards their deposit this year, up from 30 per cent in 2022.

Family help enables first-time buyers to get a leg up onto the housing ladder, but it also enables them to put down bigger deposits and purchase more expensive homes.

The average first-time buyer in the UK who had family help paid £257,290 for their home this year, according to Hamptons; £6,500 more than someone without additional contributions.

Distribution of first-time buyer loan-to-value  mortgages: Over a third of first-time buyers with family support were able to put down a deposit of at least 20% on their home this year

Distribution of first-time buyer loan-to-value  mortgages: Over a third of first-time buyers with family support were able to put down a deposit of at least 20% on their home this year

Aneisha Beveridge, head of research at Hamptons, said: ‘As home ownership rates decline through the generations, younger parents today are less likely to be homeowners than their predecessors, which reduces their ability to withdraw equity from their home to pass on to children.

‘Should interest rates stay higher for longer, it will exacerbate the gap between what those with and without family help can afford.

‘Those without help will likely face saving up for longer and buying later in life, or purchasing a smaller home in a more affordable area to keep their mortgage payments within their means.’

Charlotte Harrison, interim chief executive of home financing at Skipton Building Society adds: ‘With high property prices, escalating rents and the cost-of-living squeeze further impacting people’s ability to save for a house deposit, it’s making it almost impossible for people to get on to the property ladder without a boost to their savings. 

‘For many, despite potentially being able to pass a typical mortgage affordability check – it’s the lack of a deposit that’s holding them back from their home ownership aspirations.

‘Support from the “family bank” is a real boost to first-time buyers’ purchasing power, giving them a head start onto the property ladder much earlier than what they’d have achieved on their own.’

Overall, family contributions made up an average of 63 per cent of a first-time buyer’s total deposit, according to Hamptons.

It says more than a third of first-time buyers with family backing put down a deposit of 20 per cent or more – double the share of those purchasing without family.

The homeownership barrier: Anthony Codling, head of European housing and building materials research at RBC Capital Markets believes the Bank of Mum and Dad, should not be underestimated

The homeownership barrier: Anthony Codling, head of European housing and building materials research at RBC Capital Markets believes the Bank of Mum and Dad, should not be underestimated

Speaking to This is Money earlier this month, Anthony Codling, head of European housing and building materials research at RBC Capital Markets, said that the Bank of Mum and Dad should not be underestimated.

In his view the main barrier to home ownership is less a consequence of higher mortgage rates, but more about whether or not someone has the bank of Mum and Dad behind them.

‘Something people often talk about, but maybe don’t join the dots on, is the Bank of Mum and Dad,’ says Codling.

‘It was only in 1971 when homeownership reached 50 per cent across the UK. Up until then, we were a nation of renters.

‘Since then we have become a nation of homeowners, and my view is that we’re now getting to that first wave of mass affluence, 52 years on, where people are passing that wealth on to children and grandchildren.

This is often what affordability calculations don’t take into account – how much money people are getting from mum and dad.’

It’s not just the Bank of Mum and Dad

It appears family members beyond parents are also increasingly lending their financial support to first-time buyers.

So far this year, siblings have made up a record 11 per cent of family members contributing to first-time buyer deposits, according to Skipton Building Society’s data.

This is more than double the share recorded five years ago when it was just 5 per cent, and surpassed grandparents’ contributions, which currently amounts to 8 per cent.

Parents remain most likely to gift money towards a child’s deposit, making up 72 per cent of those lending support so far this year.

Who contributes towards a first-time buyers’ deposit: Mum and dad isn't the only family funder funder helping with house purchases in the UK this year

Who contributes towards a first-time buyers’ deposit: Mum and dad isn’t the only family funder funder helping with house purchases in the UK this year

However, this share has gradually declined from a peak of 80 per cent in 2018 as first-time buyers increasingly look to other family members for help. Parents are also the most generous, gifting an average of £15,250 so far in 2023.

Aneisha Beveridge of Hamptons adds: ‘First-time buyers are increasingly leaning towards other family members to boost their deposits.

‘Siblings are at the forefront with older brothers and sisters at the more affluent end of the spectrum putting their hands in their pockets.

‘They are highly likely to already be homeowners who want to help their younger siblings take their first step onto the property ladder.’

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source: dailymail.co.uk