The bank of mum and dad 
New findings from a study by Legal & General and Cebr show familial financial support, often called the Bank of Mum and Dad, will be crucial in revitalising the UK housing market. Facing economic challenges from the COVID-19 crisis, nearly a quarter (23%) of housing transactions in 2020 will rely on the Bank of Mum and Dad.
Furthermore, 24% of borrowers increasingly seek financial help from family and friends. This highlights the significant influence and dependence on the Bank of Mum and Dad in the housing sector’s recovery. As buyers deal with the pandemic’s aftermath, support from close circles becomes more crucial. This support will shape the property transaction landscape in the coming year.
Rising Reliance on Family Support
Since the pandemic, 24% of home buyers depend more on the Bank of Mum and Dad. The housing market lockdown in H1 stymied the Bank of Mum and Dad, reducing total lending to £3.5bn. However, the Bank of Mum and Dad will still support £50bn worth of property transactions in 2020. Inheritances are skipping a generation, with a quarter of lenders using legacies to help adult children fund house purchases. A third (33%) of those planning to buy a house in the next five years will use money from family and friends.
Impact of the Lockdown
The Bank of Mum and Dad will lend approximately £3.5 billion to family members this year. This is a significant drop from the £6.3 billion provided by parents, grandparents, and others in 2019. This decline results in 85,000 fewer home purchases. These figures illustrate the housing market’s effective closure during the COVID-19 lockdown, with HMRC reporting nearly halving property transactions in Q2 2020.
The Ongoing Role of the Bank of Mum and Dad
Despite these challenges, the Bank of Mum and Dad remains crucial, participating in an estimated 175,000 housing transactions valued at around £50.3 billion this year. As the housing market reopens, the Bank of Mum and Dad is set to play a vital role in the sector’s recovery. It will support thousands of buyers proceeding with their home purchase plans post-lockdown. The resilience of the Bank of Mum and Dad reflects its ongoing commitment to assisting families in navigating the changing real estate market.
The Bank of Mum and Dad | Leans in
Legal & General’s study shows the COVID-19 pandemic has spurred more generosity among ‘Bank of Mum and Dad’ lenders. This year, relatives and friends are expected to contribute an average of £20,000 towards deposits. This reveals a heightened willingness to support loved ones during these challenging times.
The crisis has caused 15% of BoMaD lenders to exceed their usual contributions, surpassing pre-pandemic levels. Notably, 18% of those noting a change in their giving behaviour due to the pandemic express a desire to provide at least 50% more financial assistance than before the global health crisis.
This generosity surge highlights the coronavirus’s profound impact on family financial dynamics. BoMaD network members adjust their support levels to navigate pandemic uncertainties.
Regional Variations in BoMaD Contributions
London homebuyers stand to benefit the most, with typical BoMaD “loans” averaging £25,800. The East Midlands has also seen a significant rise in BoMaD contributions, increasing from £16,000 in 2019 to £24,100 in 2020. Conversely, the North East and Yorkshire have the lowest average contributions. However, family and friends in these regions still lend a substantial £13,800 on average to support home purchases.
This trend reflects the growing reliance on familial and friendly assistance in the property market. London and the East Midlands experience the most pronounced shifts in financial support for homebuyers. As housing dynamics evolve, these regional variations underscore the diverse ways the Bank of Mum and Dad plays a crucial role in facilitating property acquisitions.
Read the full report of The Bank of Mum and Dad.
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