Bank of Mum and Dad still vital to house sales, figures show
Recent speculation that the so-called Bank of Mum and Dad would be playing a reduced role in the housing market has been turned on its head by a new report.
Research from Legal & General and the business consultancy Cebr shows some 23 per cent of housing transactions this year are backed by ‘BoMaD’ with 24 per cent of borrowers now more reliant on money from family and friends than they were before the pandemic.
However the total given or loaned by parents and family members will reduce this year, in line with the reduced transaction volumes anticipated because of the lockdown throughout spring.
Despite this, the Bank of Mum and Dad will still be involved in 175,000 housing transactions within an estimated transaction value of £50.3 billion in 2020.
Of young purchasers questioned for the research, 65 per cent who had bought recently and received support from family and friends said it was unlikely they could done so without such help. One in five expected they would have had to delay their purchase by more than five years without the assistance.
Despite the stamp duty holiday for purchases under £500,000, just eight per cent of would-be purchasers say they are less reliant on family or friends for financial support as a result of the policy measures introduced to mitigate the effects of the coronavirus crisis.
Only 12 per cent have brought forward their plans to buy since the start of the pandemic.
Legal & General’s research shows that the virus has encouraged BoMaD lenders to be even more generous than usual. This year, family members and friends will lend an average of £20,000 towards deposits.
As a result of the crisis, 15 per cent of BoMaD lenders are now planning to give more than they would have done before the pandemic to help their loved ones.
Homebuyers in London are set to receive the most, with the average ‘loan’ being £25,800. This is followed by the East Midlands, where lenders have given a significant boost to the average BoMaD contribution this year, from £16,000 in 2019 to £24,100 in 2020.
Family and friends in the North East and Yorkshire are contributing the least, but on average are still lending a generous £13,800 to help loved ones buy a home.