The ‘Bank of Mum and Dad’ one of the UK’s biggest lenders

Industry experts are expecting the number of parents providing their children with home deposits to rise again in 2017.  A joint study predicts that in the UK, nearly 300,000 mortgages will be made possible due to the generous help of the ‘Bank of Mum and Dad’, making it the UK’s ninth biggest lender!

According to a study by Legal & General and economics consultancy Cebr, parents will advance £6.5 billion this year to help their children buy a home.  This is significantly more than the £5 billion in 2016, when approximately one third of first-time buyers needed help from family and friends.  This year it’s expected to be more like 42%, who will purchase homes collectively worth £75 billion, representing 26% of all property transactions that take place in the UK in 2017.

More than 79% of those receiving help will be under 30 years old, receiving an average of £21,600, another significant increase on 2016 when the average was just £17,500.

To give some perspective, the ‘Bank of Mum and Dad’ is predicted to lend an amount on par with Yorkshire Building Society.  This reliance on parents in the UK has come about because of a combination of two things.  Firstly, lenders are asking buyers for larger deposits in order to secure better mortgage deals, and they have become more stringent with affordability criteria.  Secondly, house prices have increased significantly faster than earnings since the recession.

Additionally, many of the younger group of first time buyers are leaving university with significant debts after having to pay high tuition fees.

Many other smaller factors also play a part.  For instance, the government have been reducing help to buy schemes, and since people are living longer, the number of people under 30 receiving big inheritances is lower.  The combination of all of these factors means the trend of parents helping first time buyers is expected to continue for many years to come.