Legal & General have released an interesting report today showing that the Bank of Mum & Dad are gifting their kids so much cash that if this was projected into lending terms they would be the equivalent of a top 10 lender!
In 2016 they expect parents to lend some £5 billion to children, meaning that in essence they are funding 25% of all mortgage transactions in the UK, which is some going. Across the country, L&G report that on average they are contributing 7% of the average purchase price which equates to £17,500, a sum that will be much more acute in London.
We know that this has been especially prevalent in London and the South East for some time now, but as prices continue to rise it seems to be reaching a peak. We have seen some very large sums being gifted to children with parents being joined by grandparents as well, keen to see that their family members do not miss out on getting on to the housing ladder altogether.
Andrew Montlake, Director at Coreco Mortgage Brokers commented, “As property prices increase, it has become harder and harder for First Time Buyers to save up for an ever-growing deposit on even an average property in London without some kind of financial assistance, especially at a time when the cost of renting itself has also been rising.
“There is no doubt that without the help of the Bank of Mum & Dad, many buyers would not be sitting in their new homes now and we have seen a growing number of borrowers with parents making up some or all of the deposit monies.
“How long parents can continue this support for remains to be seen, but something needs to be done to redress the balance over the next 15-20 years before the support runs out from both Governments and parents.
“Underlying all of this is the fact that quite simply we have not built anywhere near the number of homes that we should have over the past few years resulting in a shortage of the right type of homes that are also, above all, affordable.
“As house prices continue to grow out of kilter with wages the issue will become more and more acute, causing a further divide between the ‘haves’ and ‘have not’s’ where financial assistance is concerned.”