Bank of Mum and Dad to fund £50bn-worth of property transactions in 2020
The Bank of Mum and Dad will be a driving force behind the recovery of Britain’s housing market, according to Legal & General.
In new research conducted with the Centre for Economic and Business Research, the financial giant said that nearly one in four housing transactions (23%) will be backed by the Bank of Mum and Dad in 2020, with a quarter (24%) of borrowers now more reliant on financial support from family and friends.
However, parents will lend less overall to loved ones this year, due to the impact of lockdown on the number of property transactions, alongside the wider economic consequences of Covid-19.
The Bank of Mum and Dad will lend just £3.5bn to loved ones this year – almost halving last year’s £6.3bn. It will also fund 85,000 fewer home purchases.
Despite the drop, the Bank of Mum and Dad will still be involved in 175,000 housing transactions, totalling an estimated transaction value of £50.3bn this year.
On average, family members and friends will lend £20,000 towards deposits. Homebuyers in London are set to receive the most, with the average ‘loan’ standing at £25,800, followed by the East Midlands, at £24,100.
Parents in the North East and Yorkshire contribute the least, but on average still lend a generous £13,800.
Of those who’ve bought recently and received support from family and friends, 65% said it would have been ‘unlikely’ they could have got on the ladder without help from the Bank of Mum and Dad.
One in five (19%) expect they would have had to delay their purchase by more than five years without parental support, and a further 14% said they never would have been able to buy without the help of family or friends.
Nigel Wilson, CEO at Legal & General, said: “Not only are buyers facing an uncertain economic future, but changes by lenders in the wake of the pandemic have restricted the low-deposit mortgage options on which many young people rely to make their first step.
“While the Bank of Mum and Dad is leaning in to help those lucky enough to have its backing, a generation of hopeful buyers without the support of the Bank of Mum and Dad could find themselves locked out of the housing market.”