Parents will lend over £5bn this year helping their children get a leg up onto the UK's slippery housing ladder, placing the "bank of mum and dad" firmly in the ranks of the top 10 mortgage lenders in the country, a new report today reveals.
The study – by FTSE 100 insurer Legal & General and Cebr, the economics consultancy – forecasts that parents and other family members will help finance a staggering 25 per cent of all property purchases this year, providing deposits for more than 300,000 mortgages for homes worth a total of £77bn.
The £5bn compares with £40.3bn provided by Lloyds Banking Group, the UK's biggest mortgage lender in 2014, according to the Council of Mortgage Lenders' most recent data, and puts it on par with Clydesdale Bank, the country's tenth biggest lender that year.
Around three quarters of these purchases – 256,400 – will be funded by the parents, with grandparents and other relatives or friends stepping in to help a further 22,500 and 27,000 purchases respectively.
In London, the average contribution works out as 6.2 per cent of the home’s total purchase price, or 51 per cent of the average so-called bank of mum and dad household net wealth, excluding property assets.
However the report shows that the average contribution rises to 64 per cent for families living outside of London but helping their children or grandchildren buy a property in the capital. The average contribution across the UK is £17,500 or seven per cent of the average purchase price.
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Legal and General's chief executive Nigel Wilson said that parents' generosity – while vital in helping young people get onto the housing ladder – does not make up for the fact that today's generation does not have the same advantages as baby-boomers did.
He warned that more homes need to be built, otherwise "the bank of mum and dad could soon start to experience a funding crisis of its own”.
"Helping first-time buyers is necessary – but not the whole solution. We need to modernise housebuilding and make it more efficient so that we can increase supply and quality for all forms of tenure, and all income and age groups, from students to pensioners," he added.