A new report released by the Building Society Association (BSA) has highlighted, how with the right financial support from parents, this type of lending could grow further, without jeopardising the long-term financial well-being of older generations. Recommendations from Building on the Bank of Mum and Dad, report include:
Nine in ten (87%) building societies expect the ‘Bank of Mum and Dad’ to play an increasing role in helping first-time buyers over the next 5-10 years.
But the ‘Bank of Mum and Dad’ isn’t necessarily all about parents and grandparents handing over cash in the form of gifts or loans. Lenders can and do facilitate support between generations by parents providing guarantees or using their property or savings as security for the first-time buyer’s mortgage.
Parents can also release money through an equity release mortgage or by downsizing. Older generations could use their property more inventively e.g. through ‘downsizing in situ’ and private equity loans could also contribute to the market. However, all of these are expected to be comparatively small relative to the more direct support from family members’ financial resources.
Seventy percent of the public see the difficulties young people have buying a home of their own as one of the biggest issues the country faces. However, many also believe that both lenders and the Government could do more to help.
The aim of Building on the Bank of Mum and Dad is to generate practical ideas to help more young people to buy. Suggestions that could improve the opportunities for people who have access to the Bank of Mum and Dad, as well as those who don’t.
Building on the Bank of Mum and Dad finds:
Report co-author Bob Pannell said “Our young people face huge challenges in buying their first homes. Families instinctively want to help, and it’s the job of lenders, regulators and government to ensure that they have more opportunities to do so in a sustainable way.”
Robin Fieth, BSA Chief Executive said “Home ownership remains a fundamental ambition for the majority of people. Against the challenging backdrop of high prices, a woefully inadequate supply of homes and a growing intergenerational divide, new ideas and strong debate are essential. Family help – the so-called ‘Bank of Mum and Dad’ – is great for those fortunate enough to have this option, but innovations in underwriting could help all potential first-time buyers.”