The Bank of Mum and Dad is still an important financial resource
In recent years there have been various estimates of the overall contribution of the ‘Bank of Mum and Dad’ to young people’s capacity to buy a home. According to a study by the London School of Economics, the Bank of Mum and Dad has become the sixth largest lender in the UK (see the full report here)
Additionally, Legal & General have released an infographic showing the impact the Bank of Mum and Dad (BoMaD) is continuing to have on the UK housing market
Nearly one in four housing transactions (23%) will be backed by ‘BoMaD’ in 2020, with a quarter (24%) of borrowers now more reliant on financial support from family and friends.
Mirroring the current economic climate, the amount lent by parents and grandparents is set to lend just half the amount of 2019, however this will still equate to around 175,000 housing transactions, with a value in the region o £50.3 billion.
Legal & General’s research shows that the coronavirus crisis has encouraged BoMaD lenders to be even more generous than usual. This year, family members and friends will lend an average of £20,000 towards deposits. As a result of the crisis, 15% of BoMaD ‘lenders’ are now planning to give more than they would have done before the pandemic to help their loved ones. Of those saying that coronavirus has changed the amount of money they are willing to give, almost one in five (18%) want to give at least 50% more.
If you are in this situation, either looking to lend or gift money to a loved one, or on the receiving end of financial help, please make sure you run through your options with a qualified independent mortgage adviser to ensure their generosity is able to be used to its full benefit.