A new survey has revealed that parents are spending so much helping their children to purchase their own homes that they are now one of the country’s largest lenders.
According to the study by Legal & General (L&G), the average parental contribution for homebuyers in 2019 is £24,100 – an increase of £6,000 on the previous year’s figures.
This means that parents are thought to have collectively given £6.3 billion to their children in the last year, which would make the ‘Bank of Mum and Dad’ the tenth biggest mortgage lender – outranking the official tenth largest mortgage lender Clydesdale Bank, which only lent £5 billion last year.
Thousands of UK homebuyers have become reliant on their parents to either get onto the housing ladder in the first place or move to a larger home, as the disparity between house prices and wage growth widens.
Of those surveyed almost a fifth said they had already or would help a family member to buy a home, as many felt it was their responsibility to do so.
The poll of 1,600 parents found that more than half were using cash to fund their children’s home purchase. However, many others were withdrawing money from their pensions to help or were considering using equity release from their own homes.
As a result, 15 per cent admitted that they had to accept a lower standard of living in retirement, while more than a quarter were not confident that they had sufficient money for their retirement.
Despite the growth of lending from parents, there is growing evidence that parents are taking their children to court following a disagreement over home loans.
It is estimated there are between 12 to 15 cases every month of parents taking their adult children, or their child’s spouse, to court to retrieve cash from a home loan.
The figures come from Quanta Capital, a company that loans money to people pursuing such cases, who just five years ago only recorded about three cases a month.
If you are considering lending money to one of your children for the purchase of a home it is strongly advised that you seek financial and legal advice before doing so.
Link: Bank of Mum and Dad