31 May, 2018/ by Homeward Legal /First Time Buyer
More than one in four housing transactions in the UK is funded by the Bank of Mum and Dad (BoMaD), according to new research.
The Bank of Mum and Dad - in reality, parents, grandparents, other family members and even friends - will fork out a staggering £5.7 billion in 2018 alone to help their loved ones get on the housing ladder.
The figures were produced for insurers Legal & General by economics consultancy CEBR. They show that 27 percent of buyers will need financial help from the Bank of Mum and Dad to buy a home.
Older children still accessing family finance
The research also shows that those who need to withdraw some cash from the family account are getting older with 43 percent of those aged 35 to 44 saying they got financial help from BoMaD while more than a quarter (26 percent) of those aged 45 to 54 are still relying on the parentals to help with housing.
According to Legal & General, the average age of a first-time buyer in some parts of the UK is now in the early 30s, and their research reflects that property buying is now more likely to happen when we're older and not younger.
However, while BoMaD will find almost £6bn this year, that's down on last year's all-time high of £6.5bn, reflecting perhaps a tightening of financial belts with the average contributiong down from £21,600 in 2017 to £18,000 in 2018.
Less secure about financial future
And with a large majority (71 percent) of BoMaD lenders using cash savings to help their offspring and loved ones, 10 percent of those quizzed for Legal & General said they felt less secure about their own financial future after dipping into their savings for their family. Almost one in five said they were tightening their own belts by cancelling holidays and sticking with an older car rather than buy a new one.
While cash in the bank is obviously the most popular way to help a loved one, the CEBR research revealed that equity release is one of the under-used ways of releasing finance. While there is around £820bn of housing wealth owned by UK homeowners aged 55 and over, only 4 percent of those have used equity release, where a homeowner can access some of the value of their property in cash.