Average rates across all fixed mortgage terms have fallen since the start of the year.…
Lending from parents to help their children get on the UK property ladder will amount to £5bn in 2016, according to data from Legal & General (L&G).
L&G says it means the so-called Bank of Mum and Dad will help to finance 25% of all UK mortgage transactions this year – at an average amount of £17,500.
If this lending prowess was combined into a formal business, it would be a top 10 UK mortgage lender, adds L&G.
But it warns this method of lending is coming under increasing pressure.
“The Bank of Mum and Dad plays a vital role in helping young people to take their early steps on to the housing ladder,” said Legal and General chief executive Nigel Wilson.
But he said it highlighted a number of important issues, including house prices being “out of sync with wages”.
Many of those accepting money from their parents are being given substantial sums.
Dan Howdle bought a three-bedroom semi-detached a year ago in Rugeley in the West Midlands, thanks to £50,000 from his parents.
“I wouldn’t have had a chance of doing it without them, certainly for the next five years,” Mr Howdle, who works for a broadband company, told the BBC.
“Before this gift, I was expecting to be a renter for the rest of my life,” he said.
In London, Mr Wilson said this funding method was reaching “tipping point”, with more than half of average household net wealth (excluding property assets) going towards helping their offspring on to the housing ladder.
Mr Wilson also said that not all young people were able to access parental support, while many who could were still unable to afford a home.
He added: “We need to fix the housing market by revolutionising the supply side – if we build more houses, demand can be met at a sensible level and prices will stabilise relative to wages.”
Research from L&G and economics consultancy Cebr suggests the Bank of Mum and Dad will provide deposits for more than 300,000 mortgages, purchasing homes worth £77bn this year.
The Bank of Mum and Dad’s average financial contribution is £17,500 or 7% of the average purchase price, it says.