One in four of all UK housing transactions will be financed by the Bank of Mum and Dad (BoMAD) this year alone. But new research by financial services giant Legal & General has revealed that many people are now using their retirement funds to help their family get on to the housing ladder.
The overall lending by the BoMAD is estimated to reach £5.7 billion in 2017, helping to purchase almost 317,000 homes.
While that is down from the high of £6.5bn in 2017, people will borrow an average £18,000 to buy a home.
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Cashing in pension pot
However, in its third BoMAD report, Legal & General has revealed that many parents are feeling the pinch when it comes to helping their offspring and other family members.
One in five (27 percent) parents and grandparents aged 55 and over say they are worse off because they have dipped into their funds to help their family but are willing to accept a lower standard of living to benefit their loved ones.
The data shows that 73,000 have either cashed in a pension pot or used funding from annuities, and one in 10 now feels less financially secure because of that.
Equity release growth potential
Almost 44,000 BoMAD transactions were funded by equity release, where parents or grandparents used the value of their own property to help a family member buy their own home. That’s only 4 percent of UK-wide homeowners aged 55 or over, so Legal & General suggests this particular area of the market is likely to grow in coming years.
Parents are most likely to be the source of BoMAD, but the Legal & General report shows grandparents, other family members and even friends have loaned or gifted the cash to fund 108,800 property buys.
Almost three out of five (59 percent) of younger homeowners (those aged under 35) bought with financial assistance from family and friends. According to Legal & General: “Without the Bank of Mum and Dad, the first-time buyer market would collapse.”
Support from Homeward Legal
Parents or grandparents looking to equity release to help their family can get expert legal advice through Homeward Legal. Our panel of experienced conveyancing solicitors are based across England and Wales and have the expertise required for equity release transactions.
We’re open seven days and you can call on 0800 038 6699. You can also get an instant bespoke quote for conveyancing services.