Scale of parental lending shows need for reform, Legal & General report argues
The scale of lending by affluent parents to their children for home purchases reveals the extent of the UK housing sector’s problems, according to a report by Legal & General.
The investor - which is behind plans to roll-out thousands of affordable flatpack homes from a factory it has built in Yorkshire - said parents are expected to lend their offspring more than £6.5bn to put down house deposits this year, up from £5bn in 2016.
The research, published in conjunction with the Centre for Economics and Business Research, argued the rise of the ‘Bank of Mum and Dad’ “signals a symptom of our broken housing market”.
L&G said the situation highlighted the supply-side crisis in UK housing “and the critical need to build more homes, across all tenures and all forms of construction, to satisfy demand”.
The pair’s report said parent funding was now on a par with the 9th largest mortgage lender in the UK – the Yorkshire Building Society – and will be involved in 26% of all property transactions that take place in the UK market this year.
The report found that 79% of parent funding went to people under the age of 30, while 76% of such assistance went towards the deposit, with only 4% going solely on mortgage payments.
Parents in the South West of England were the most generous, providing £30,000 of financial support per transaction on average, more than in London (£29,400). Welsh parents gave the least - £12,500.
Bill Hughes, head of LGIM Real Assets, said: “The growing role of the Bank of Mum and Dad in supporting young people get onto the housing ladder signifies that the UK property market is simply not building enough homes. This is not sustainable and as an industry we need to work together to fix the housing market so that we are providing housing in areas which are well connected and where people want to live.
“The right approach is to regenerate not just residential housing but the totality of the built environment of towns and cities in which the homes are built. Infrastructure, local economic growth and jobs are all key to creating thriving communities.”