The Bank of Mum and Dad: The Unlikely Lenders Keeping the UK Housing Market Afloat

The UK housing market is facing a crisis, and it’s not just the usual suspects of high prices and lack of supply. A new report has revealed that parents are becoming one of the UK’s largest lenders, with many first-time buyers relying on the “Bank of Mum and Dad” to get onto the housing ladder.

The Rise of the Bank of Mum and Dad

According to a report by the Building Societies Association (BSA), the Bank of Mum and Dad is now one of the UK’s largest lenders, with parents lending or gifting over £8 billion to their children in 2023 alone. This staggering figure highlights the growing reliance on family support for first-time buyers.

“Someone’s ability to become a first-time buyer is increasingly dependent on their good fortune in picking the correct family to be born into rather than on their own success in life.” - Neal Hudson, housing analyst

The Inequality of Homeownership

The report also highlights the growing inequality in homeownership, with those who have family support being more likely to get onto the housing ladder. This creates a two-tier system, where those without family support are left behind.

“The need for help from family reinforces existing regional and socio-economic divides.” - Neal Hudson

The Impact on Parents

But it’s not just the children who are affected. Parents who are helping their children are also feeling the strain. A survey by HomeOwners Alliance found that 54% of parents had helped or expected to help their children, with 56% of this group saying it would directly affect their own financial position.

“While we all know that the Bank of Mum and Dad is supporting many people’s first steps onto the housing ladder, what our survey shows is the emotional and financial strain it puts on families in today’s Britain.” - Paula Higgins, HomeOwners Alliance chief executive

Innovative Solutions

The industry has been working to address this issue, with innovative mortgage lending products emerging to help families. One such product is the Family Assist Mortgage, which allows parents to use the equity in their own home as security for their children’s mortgage.

“It is a really interesting way of doing it because, as a parent, particularly if you have more than one child and you haven’t got pots of cash, you can effectively assign the equity across and after about seven years it is freed up.” - Paul Broadhead, BSA head of mortgage and housing policy

Conclusion

The Bank of Mum and Dad is a symptom of a broken system, where the gap between house prices and wages is widening. It’s time for a long-term government strategy to address this issue and create a more equitable housing market.

The Bank of Mum and Dad is becoming a lifeline for first-time buyers

Family support is becoming increasingly important for first-time buyers

The inequality of homeownership is growing, with those without family support being left behind