LONDON — Homebuyers received money from their parents to help with a deposit on a quarter of all mortgage transactions in 2016, according to research from Legal & General.
Family members gave an average of £17,500 each to fund 306,000 property deals worth £77 billion, the study said, as buyers battled with increasingly unaffordable house prices.
More than half of the recipients were given the money as a gift, while 18% received it as a loan with no interest.
A third of all homeowners in London received help from the so-called Bank of Mum and Dad, putting it on a par with the Yorkshire Building Society — the country’s ninth-biggest mortgage lender.
The average contribution towards a home was 37% of that household’s net wealth, and is expected to rise to 51% by 2035, assuming house prices continue to rise faster than wages.
“Fundamentally, for all their generosity, our research shows that families and friends cannot solve a UK housing crisis caused by too few homes. It’s not fair on those without wealthy families, and it’s not sustainable in the future,” Legal & General said in its report.
L&G quotes analysis from homelessness charity Shelter showing that a pint of milk would cost over £10 if food prices had increased at the same rate as house prices. Wages would for an average couple with children would be £44,000 higher if pay had kept pace with house prices.
Earlier this year the Social Mobility Commission reported that just 31% of 25- to 29-year-olds owned a home, compared with 63% in 1990. 39% of 20-24 year olds purchased their own homes in 1990, while only around one in ten managed to do so in 2015.
“Aspiring first-time buyers for whom family help is unavailable will most likely remain disadvantaged, even more so if their parents fall into the least educationally qualified category,” the report said.
“Going forward, the gap will almost certainly be maintained between those in the UK who can acquire that most significant of financial assets, the family home, and those who cannot,” it said.
This chart shows the increase in homebuyers receiving help from parents for mortgages:
And this chart shows how fewer young people are owning their homes:
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