Ben Thompson, managing director of the Legal & General Mortgage Club, warned that the Bank of Mum and Dad, which assists 84% of first-time buyers under 30, was “unsustainable” and could soon reach breaking point.
L&G’s research showed that up to half of consumers expect to contribute between £20,000 and £50,000 in financial support over the course of their life, made up of 48% of 18 to 24-year-olds, 37% aged 25 to 34, 35% aged 35 to 44, 30% of 45 to 54-year-olds and 26% of those aged 55 and over.
In addition, a quarter in each age group believe they will never be able to stop financially supporting their children with a deposit for a home.
Ben Thompson, managing director of the Legal & General Mortgage Club, said the Bank of Mum and Dad has proved a lifeline for first-time buyers and become one of the most active “lenders” out there.
However, he said: “Such a consistent level of ‘lending’ is not sustainable, especially when you consider the ageing population and the generally poor provision of retirement saving in this country.
“In many ways, these parents are robbing Peter to pay Paul and as the financial strain increases on all of us it may not be too long before the Bank of Mum and Dad reaches its breaking point, leaving not only a huge gap in retirement provision, but an already depressed first-time buyer sector even more in the mire.”
Thompson added: “We as an industry and the government must do all we can to support the Bank of Mum and Dad, as it has become an important pillar in the current UK housing market and therefore is crucial to our economy.
“It’s vital therefore that the industry does its best to provide innovative and inclusive products that help reliable first-time borrowers to realise their dreams of home ownership and lessen the load on well-meaning parents. Without a flow of new lending we could end up with a sizeable financial hole in the centre of middle England that may create even bigger problems further along the line.”
