Over half of young first time-buyers reliant on the Bank of Mum and Dad

More than half of young first-time buyers need financial support from parents in order to achieve their dreams of home ownership.

A report by Legal & General, the insurer, found that 56pc of first-time buyers now rely on financial support from the so-called Bank of Mum and Dad to help them onto the housing ladder.

Seven in 10 new homeowners said they would not have been able to buy otherwise. Without this help, the average buyer would have had to postpone their purchase for four years.

In total, under-35s will receive £1.4bn in contributions this year, allowing them to purchase property worth £18.1bn.

Nigel Wilson, of L&G, described the housing market as “broken” and said that parents were often forced to eat into their own retirement savings and rainy day funds to help their offspring.

Lack of mortgages and high interest rates for first-time buyers have also proved a problem for the market this year, he added.

Older buyers are also increasingly turning to their parents for financial assistance, with £2.1bn being borrowed by over-35s this year. A third of prospective buyers, of all ages, now believe they will need help from family or friends. 

Mr Wilson said that the inter-generational dependency was growing, with many people now relying on cash from grandparents in addition to their mother and father. However, this risked disenfranchising buyers who do not have family members to rely on.

The report estimated that parents will financially support 73,160 property transactions for under-35s in 2020, which is just 8pc lower than last year despite the housing market being frozen for two months due to lockdown.

The average amount provided is £19,000, but for some young people the amount of cash provided is much higher. L&G said that 21pc of respondents had received more than £30,000.

Only 30pc of adult children expected to pay any of the money back.

Mr Wilson said: “The Bank of Mum and Dad’s role in Britain’s housing market is ubiquitous. Parents, grandparents, family and friends are digging into their pockets to help young, hopeful buyers and even growing families to make their housing plans a reality. 

“These generous lenders are often funding most or all of the deposit buyers need to step onto or up the ladder.”

Source Article