The big news today is around a new report by Legal & General which found that the Bank of Mum and Dad contributes 26% of funds to the UK housing market. This is set to be a stunning £6.5 billion this year which, if the Bank of Mum & Dad were an actual bank, would make them the 9th biggest lender on a par with Yorkshire Building Society.
To most of us active in the London property market this comes as no real surprise, but the scale overall is nonetheless pretty astounding. According to the FT, “This year 42 per cent of prospective homeowners expect to get help from relatives, up from one-third last year.”
This is all despite the fact that interest rates are at record lows and there is now much more choice at higher Loan-To-Values for those with smaller deposits. Recently, for example, we have seen lenders reduce rates for those with just 10% deposit to just 1.99%, (3.53% APRC) on a 2 year fixed basis which is cheap in anyone’s book. Even 5 year fixes are below 3% now whilst at 95% LTV there is more choice.
Where the Bank of Mum and Dad, or even Gran and Grandad these days, are concerned there are also more clever options around rather than just gifting the cash. Several lenders have good Family Guarantee schemes such as Barclays Springboard Mortgage and the Family Building Society schemes which mean you can help your kids without waving goodbye to the cash forever.
That said, parental help is not going to abate anytime soon and has become an important part of the market, but the good news is that there are so many different and competitive options around now if you know where to look.