The "Bank of Mum and Dad" has always been an integral part of the UK housing market, referring to homebuyers relying on their parents' assistance to purchase homes. However, under the pressures of sustained inflation and rising housing prices, other relatives, including siblings, have also been recruited into this venture. This emerging "Bank of Family" is expected to provide record-breaking financing support for homebuyers.
On Monday, two reports released by Legal & General showed that the continuing issue of housing affordability means people looking to buy homes are increasingly turning to their parents, grandparents, and more frequently, their siblings, to help gather the necessary down payment. Despite a recent drop in house prices, increased mortgage rates have led to higher monthly payments for homebuyers, thus increasing the number of those needing family assistance.
Based on separate surveys of homebuyers, parents, and grandparents, Legal & General projects that this year family members will provide £8.1 billion to homebuyers, with an average of £25,600 per transaction. The institution predicts that by 2023, transactions in the UK housing market supported by relatives will reach 318,400, with the majority (186,700 units) being purchased or expected to be purchased with the help of parents, 39,800 units with the aid of grandparents, and 91,900 units with the support of other family members or friends.
In recent years, the value of financial support from families has been soaring, except for a decline during the COVID-19 pandemic lockdowns. Legal & General expects that by 2025, financial support from families for home purchases will climb to £10 billion. Over one-fifth of first-time buyers told Legal & General that without this aid, they would have to delay buying a home for more than five years. Meanwhile, one in ten stated that without family support, they would not be able to purchase a home at all.
Another study conducted by the real estate firm Hamptons found that while parents still provide the largest source of funding for first-time buyers, support from other family members is widely increasing. An analysis of mortgages issued by Skipton building society this year showed that 32% of first-time buyers received family support, with 72% of that money coming from their parents, down from 80% in 2018. This year, siblings were the most likely to offer help at a rate of 11%, compared to just 6% six years ago.
Aneisha Beveridge, Head of Research at Hamptons, questioned whether the "Bank of Mum and Dad" is beginning to run dry. Beveridge noted that with homeownership rates declining across generations, the capacity of young parents to turn their own homes into assets for their children has significantly decreased. Consequently, first-time buyers are increasingly reliant on financial support from other family members, leading to an upgraded version of the "Bank of Mum and Dad" – the "Bank of Family".
Bernie Hickman, CEO of Legal & General Retail, mentioned that family wealth is becoming a prerequisite for homeownership, leaving some consumers without savings or who are in the process of saving, excluded from the housing market. While the "Bank of Mum and Dad" or "Bank of Family" can solve this issue to some extent, it poses risks to the savings, pensions, and retirement life of parents or other relatives.
