More money is given by the bank of Mum and Dad than ever rising to £6.3 billion to help children buy their first home.
Research by Legal & General and Cebr has revealed the amount of money given by the bank of Mum and Dad to their children on the property ladder has increased 10.5% from £5.7bn last year to £6.3bn in 2019.
Parents are more generous than ever with the average contribution rising by more than £6,000 from £18,000 in 2018 to £24,100 this year with 77% receiving support being home movers.
The only option for many home movers is to stay in their existing home and continue saving more for a bigger deposit or they could receive help from a family member that can release lump sum cash upfront from a lifetime mortgage.
First time buyers struggle to save for the substantial deposits and costs associated with buying their first home would need to buy properties further away even if they can afford the monthly repayments.
Mum and Dad funding more generous
With the slowdown of UK property transactions in 2019 the number of purchases funded by family are 20% lower reducing from 316,600 last year to 259,400 this year.
Despite the slowdown, 19% of all mortgage transactions receive funding to help family and friends with total lending up £600 million from 2018 and for older parents this could come from a retirement interest only mortgage (RIO).
The following table from Legal & General shows the average amounts given by the bank of Mum and Dad to children in 2019.
| Region | 2018 | 2019 |
|---|---|---|
| London | £30,600 | £31,000 |
| Wales | n/a | £30,600 |
| South West | £19,300 | £24,200 |
| South East | £21,700 | £29,000 |
| East of England | £17,900 | £25,500 |
| North West | £12,900 | £24,200 |
| Yorks and Humber | £16,900 | £17,200 |
| Scotland | £10,800 | £16,400 |
| East Midlands | £17,300 | £16,000 |
| North East | £12,000 | £13,900 |
| West Midlands | £14,700 | £13,700 |
In the North West region the bank of Mum and Dad have increased their loan by 87.5% from an average of £12,900 last year to 24,200 in 2019 and in the South West this is 53.8% higher.
For remortgage buyers living in regions with rising house prices, this gives them an opportunity to release capital which they can give a child the deposit on their first home.
See what the monthly interest rate would be for the deposit to held a children or grandchildren get on the property ladder using this link:
Free equity release calculator with instant figures to release cash for a deposit.
The rise in the amount of support for family and friends could be due to more expensive properties being bought with 15% giving help to buy a home with four or more bedrooms.
Of the three-bedroom houses or flats that were purchased, 44% received support from the bank of Mum and Dad including releasing cash from your home and 38% helped family and friends to buy a two-bedroom home.
Support can even come from buy-to-let investors by using a lifetime mortgage for their property portfolio to repay any loans and gift to children.
Funding support from other people
The bank of Mum and Dad is funded mainly from parents with about 66% purchases supporting first time buyers and home movers.
Other family members or friends supported about 20% of property purchases and grandparents supported 14% of purchases.
For older homeowners the considerable property values allows the equity release buyer to access money using a lifetime mortgage with interest rates related to loan to values based on age, providing the deposit on the new home.
Nigel Wilson Group Chief Executive at Legal & General said, the Bank of Mum and Dad continues to be the ‘iceberg’ mortgage lender beneath the surface of our housing market, all but invisible yet exerting a massive influence.
This year, parents or grandparents, family or friends are set to lend thousands more to fund nearly one in five house purchases, says Mr Wilson.
Millennials aged under 35 continue to rely on their parents with 62% needing financial support while 22% of older home buyers aged 45-54 have received financial assistance to purchase their latest property.
Of those aged 55 plus about 7% receive support from family and friends to buy their home and this is expected to double to 14% in the future.
What are your next steps?
Talk to our London City Mortgage advisers if you are an older homeowner releasing cash from your property, we can recommend the lifetime mortgageand taake you through the process of completing the lifetime mortgage.
Find out more about provider offers and latest interest rates for the deposit to help a family member on the property ladder at this link:
Free equity release quote with interest rate to give a deposit on a property.
Our expert mortgage advisers can access the leading products to meet your needs. Learn more by using the equity release calculator, property value tracker chart and mortgage costs calculator.
