Generous parents helping their cash-strapped offspring are predicted to provide deposits for nearly 300,000 mortgages, according to a joint study.
The so-called ‘Bank of Mum and Dad’ is set to advance £6.5bn this year to help their children buy a home, making it the UK’s ninth biggest lender. The figure is significantly higher than the £5bn they advanced in 2016, according to a study by Legal & General and economics consultancy Cebr.
Parents are expected to provide deposits for more than 298,000 mortgages, helping their offspring to purchase homes collectively worth £75bn.
Overall, they will be involved in 26% of all property transactions that take place in the UK this year and their lending is on a par with Yorkshire Building Society’s.
The main cause of the situation is the fact that house prices have increased significantly faster than earnings, meaning affordability has become increasingly stretched.
Nigel Wilson, chief executive of Legal & General, said:
“Parents want to help their kids get on in life, and the Bank of Mum and Dad is a testament to their generosity, but it is also a symptom of our broken housing market.”
The research suggested it is getting increasingly difficult for young people to get on to the property ladder.
In 2016, a third of first-time buyers needed help from family and friends, but this year that figure is expected to jump to 42%.
Millennials are the biggest recipients of funding from the Bank of Mum and Dad, with 79% of the total going to people aged under 30.