Family members will be helping with more than a quarter of a million (259,400) property purchases in 2019, down from 316,600 transactions in 2018. However, this figures still amounts to nearly one in five (19 per cent) transactions in the UK mortgage market.
Parents are making average contributions of £24,100 to help their offspring on the property ladder this year, up £6,000 from the typical contribution in 2018. This rise is double the average UK house price increase of £3,000 in the year to March 2019.
Legal & General says the jump has increased total parental lending by 10 per cent this year – up to £6.3bn from £5.7bn in 2018.
Wales on par with London
Those in London are contributing the most to help family or friends onto the ladder, £31,000 per transaction on average, but those in Wales were also supporting loved ones to the tune of £30,600.
In some parts of the UK, there has been bigger than average rise in contributions from family or friends. In the North West, the average contribution has nearly doubled from £12,900 to more than £24,000, while the South West saw this rise by more than £10,000 to £29,700.
This shift in loan size could be to support purchasing larger properties.
Three-bedroom houses or flats were the most commonly purchased properties in 2019 accounting for 44 per cent of family-supported purchases, while 38 per cent helped to buy a two-bedroom property. Some 15 per cent of family lenders are even helping loved ones to purchase properties with four or more bedrooms.
More complex role
This year’s Legal & General findings also suggest families are playing a more complex role in the housing market than previously thought.
Those aged 35 and under continue to rely on family help the most, with 62 per cent needing financial support. However, the research found 22 per cent of people aged 45 to 54 have also received financial assistance from family to purchase their latest property.
About seven per cent of over-55s received help from family or friends to buy their most recent home. This support for older buyers is predicted to double, with 14 per cent of Britain’s over-55s expecting assistance for a future house purchase.
Skewed, broken housing market
Nigel Wilson, group chief executive at Legal & General, said families continued to be all but invisible yet exerting a massive influence, funding purchases across the country and helping people to defy the economics of affordability and realise their housing dreams.
“This year, parents or grandparents, family or friends are set to lend thousands more to fund nearly one in five house purchases,” he said.
“The Bank of Mum and Dad is a symptom of Britain’s broken housing market and it goes far beyond millennials relying on their parents as more older borrowers look to family and friends for financial support.
“Our reliance on this funding is an increasingly skewed facet of the UK housing market. It’s dependency, not generosity. It’s is socially divisive and it’s creating a ‘locked out’ generation of first-time buyers who aren’t lucky enough to benefit from this kind help.
“It’s also almost certainly eroding older people’s finances when they need it to fund care and retirement – parents, grandparents, even friends are digging ever-deeper into their savings and pensions.”