Bank Of Mum And Dad a Top 10 Mortgage Lender

The ‘bank’ of Mum and Dad (BoMaD) is now behind a quarter of British mortgages, and is now listed as one of the top 10 mortgage lenders in the UK, alongside the likes of Barclays and Lloyds. This year, the Bank of Mum and Dad will lend more £5 billion to help their children get on the housing ladder offering deposits for 300,000 mortgages, according to a report by Legal & General.

The average parental contribution towards a deposit is now £17,500 of 7% of the average property price, and is a necessity for many first time buyers. Over half of the under-35s homeowners have received funding from family or friends including grandparents. This is thought to be a ‘direct consequence of double-digit house price inflation that has far outstripping zero real wage growth’ according to Nigel Wilson, Chief Executive of Legal & General. Pay has risen at an annual rate of only 1.5% since the financial crisis, yet the average UK house price in England is now above £300,000.

The informal mortgage lending of parents to their children arguably has been by choice, but does the formal recognition of the BoMaD now mean that the pressure on parents to contribute is increasing unfair.

Rakeem and I discuss the implications of the new recognition for BoMaD and discuss whether or not it’s fair that the BoMaD continue to support their children into adulthood; if it really makes a difference and offers the potential to improve the situation, and the implication of parents who may be struggling to afford helping their children as they themselves get older and prepare for retirement.

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