The “Bank of Mum and Dad” is witnessing an unprecedented surge in activity, as family financial support is projected to facilitate a remarkable 318,400 property acquisitions in the United Kingdom for the year 2023.
In this current year alone, the “Bank of Mum and Dad” is poised to provide £8.1 billion to aspiring homebuyers, extending support to a substantial 47% of all homes purchased by buyers under the age of 55.
Projections indicate that the “Bank of Mum and Dad” is expected to back approximately 357,200 home purchases each year by 2025. This trend, however, poses a challenge for many prospective buyers without access to this invaluable support, making property ownership even more elusive.
According to recent research and forecasts from Legal & General and the Centre for Economics and Business Research (Cebr), financial assistance from family members, colloquially known as the ‘Bank of Mum and Dad,’ is set to underpin 318,400 housing transactions in 2023.
While the previous years had seen this lending recorded as the ‘Bank of Mum and Dad,’ this year, the terminology has shifted to ‘Bank of Family’ to reflect better the diverse contributions from various family members and the evolving dynamics of modern family structures.
The value of financial support provided by families and the number of home purchases it aids have both experienced substantial growth over the past seven years. Following a temporary decline during the Covid-19 lockdowns, familial financial support has rebounded significantly. This year, it is estimated that the average amount of funds provided by the ‘Bank of Mum and Dad’ will reach £25,600, with total lending expected to reach £8.1 billion in 2023, marking a 50% increase from 2020. The total value of properties acquired with assistance from the ‘Bank of Mum and Dad’ is predicted to reach an impressive £124.6 billion this year.
According to the research, family contributions are projected to reach an astounding £10 billion by 2025, underscoring the growing reliance on financial support from parents, grandparents, and other family members.
This highlights the challenges faced by aspiring homebuyers who lack access to such support. A majority of recent or potential beneficiaries of the ‘Bank of Mum and Dad’ revealed that without financial assistance from their loved ones, they would have to delay their home purchase. Shockingly, more than one in five (21%) stated that the delay could exceed five years, while one in ten first-time buyers would be unable to buy a home without the assistance of the ‘Bank of Mum and Dad’.
Younger and first-time buyers find themselves particularly dependent on this direct financial support, often finding homeownership unattainable without it. In 2023, the ‘Bank of Mum and Dad’ is set to provide support to nearly half (47%) of homebuyers under the age of 55, with the majority (58%) of this support going to first-time buyers.
This pattern emerges because these groups typically struggle to accumulate the necessary down payment for a home purchase.
The research also revealed that 77% of buyers receiving family assistance allocate at least a portion of their funding toward a deposit. This is unsurprising given the fact that average household savings have failed to keep pace with the substantial increases in deposit requirements resulting from significant house price inflation.
Families aren’t limited to offering just monetary aid; many are also providing indirect financial support to help their loved ones bolster their savings. For instance, almost a third (31%) of parents and grandparents have welcomed adult family members to live with them to facilitate easier saving for a deposit. An additional 37% expressed their willingness to house their adult children in the future. Estimates suggest that buyers save an average of £24,900 when residing with family members, funds that can be directed toward their deposit.
However, this support also contributes to widening the homeownership gap, as it relies on households being financially capable of accommodating additional residents and having sufficient space to house them.
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