The “Bank of Mum and Dad” is now one of the biggest mortgage lenders in the UK, new figures from Legal & General and the Centre for Economics & Business Research claim.
Parents will lend as much as £5 billion this year to help their grown-up children get on to the property ladder. The Bank of Mum and Dad now ranks among the top ten lenders for property purchases.
In nearly 60 per cent of cases the money is a gift, while for 18.3 per cent of cases it is a no-interest loan. Only 4.8 per cent receive the money as a loan with interest repayments.
The average parental contribution for homebuyers this year is £24,100, up by more than £6,000 compared to last year. Collectively parents have given £6.3 billion, high enough to rank the bank of mum and dad 10th if it was a mortgage lender.
Chris Knight, Chief Executive, Legal & General Retail Retirement said “There are a vast range of considerations today’s retirees face when it comes to planning their finances, from
whether they can afford to help their children buy a home, to setting aside funds for any future care needs they may
have. Parents and grandparents across the UK want to see their loved ones settled in homes of their own and are
giving generously as part of the Bank of Mum and Dad. Many are using their pensions and savings to help out and
unfortunately this could be leaving some facing a poorer retirement, especially if they don’t get the right advice.
With these pressures, it makes sense that the financial services industry should help provide solutions to suit a
range of circumstances.”
“Housing wealth has the potential to play a hugely transformative role for both Britain’s retirees and the next
generation of homeowners. There is around £1 trillion of property equity owned by the over-55s. Not only could this
wealth be transferred across the generations to provide a ‘living inheritance’ for children, but it could also give many retirees the financial freedom they need to enjoy the colourful retirement they really want.”
UK’s biggest mortgage lenders in 2018:
1. Lloyds Banking Group £42.5bn
2. Nationwide £35.7bn
3. Royal Bank of Scotland £30.5bn
4. Santander UK £28.3bn
5. Barclays £23.1bn
6. HSBC Bank £21.5bn
7. Coventry Building Society £9.2bn
8. Yorkshire Building Society £8.7bn
9. Virgin Money £6.8bn
10. Clydesdale Bank £5bn
*Data from UK Finance
L&G’s research, based on a poll of 1,600 parents, found more than half were using cash to help their children, but others were withdrawing money from their pensions or said they would consider using equity release from their homes.