Housing Crisis Puts Further Strain on the Bank of Mum and Dad
More British parents than ever before are getting actively involved in helping their kids get on the property ladder. Research suggests that for the first time in history, parents will borrow more than £6.5 billion, specifically for the purpose of helping their children secure their first homes.
This represents an enormous 30% increase on the £5 billion reported in 2016, suggesting that the struggle among first time buyers to raise the required capital is intensifying at an alarming pace. The study, carried out by Legal & General and economics consultancy Cebr, noted that parents will this year be involved in more than 25% of all British property transactions.
On the whole, this ‘bank of mum and dad’ approach to purchasing properties is expected to result in total property purchases worth more than £75 billion by the end of the year. This includes a staggering 298,000 mortgage deposit contributions. This £6.5 billion in total parental contributions is somewhere in the region of the total annual mortgage lending tally of the Yorkshire Building Society, to put it into some kind of perspective.
In addition to more parents borrowing on behalf of their children than ever before, the amount parents are borrowing is also escalating all the time. In 2016, the average parental assistance tally came in at £17,000. This year, it has increased to more than £21,000. The report also noted that the under 30 age group represented the largest of all recipient groups, accounting for around 79% of the funding.
While Wales is expected to see the lowest average parental contribution per transaction of approximately £12,500, the figures skyrockets to closer to £30,000 for London. According to the authors of the report, the figures comprehensively confirm the on-going and escalating flaws in the UK housing market, which are working in favour of wealthy investors and excluding the majority of first-time buyers.
“This is the second year of our bank of mum and dad research programme and the statistics show the problem is getting worse, not better,” commented Nigel Wilson, the chief executive of L&G.
“Transaction volumes are down in the housing market, but [parental] funding is growing exponentially. This is not a good thing, nor is it sustainable or equitable for our parents [the lenders] or young people [the borrowers],”
“The intergenerational inequality that creates the demand for [parental] funding continues to widen – younger people today don’t have the same opportunities that the baby boomers had, including affordable housing, defined benefit pensions and free university education,”
“Parents want to help their kids get on in life, and the bank of mum and dad is a testament to their generosity, but it is also a symptom of our broken housing market,”
“The UK is experiencing a supply-side crisis in housing – we are simply not building enough houses. We need to build more homes for the young, old and families alike, more quickly and cost effectively.”
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