And even more staggering is that this will mark a 30% increase on 2016!
These articles are based on research carried out by Legal & General and economics consultancy Cebr. Full details of the research can be found here. I do recommend that you have a read of it – it makes for very interesting reading.
Just over a quarter of home owners say they received financial help to buy but for the under 35s that rises to 62%.
So what is the Bank of Mum and Dad and why is it playing such an important role in the property market?
What is the Bank of Mum and Dad?
This is the term used to describe money provided to home buyers by family and friends, usually parents (hence the Bank of Mum and Dad) to help their children with their deposit when buying a property and is usually to help first time buyers.
In my experience helping first time buyers in the Edinburgh property market, I can certainly confirm that almost all the first time buyers we help are getting financial assistance from their parents.
But the recent articles seem to indicate that this financial assistance is a mix of loans and gifts, whereas in my experience loans are rare and gifts are the norm. The reason for this is simple: lenders (banks and building societies) who provide mortgages do not like second loans but seem reasonably happy for mum and dad to gift the money to their children.
Where did the Bank of Mum and Dad come from?
It has probably always existed but during the financial crisis which started in 2008, the role of the Bank of Mum and Dad started to become more of a necessity than a helping hand.
Before the banking crisis of 2008, lenders – rightly or wrongly – were prepared to offer home buyers 100% mortgages as a matter of course. But as a result of the financial crisis and its aftermath, the government and banks decided that lenders should be more sensible in their lending and so we went from 100% mortgages down to 80% and we are now at around 90% mortgages for first time buyers but with 95% mortgages also being available.
So we went from a time where first time buyers could get onto the property ladder with no savings or deposit, to having to find a substantial deposit. A deposit they could not hope to save from their wages and so the Bank of Mum and Dad started to fill the gap.
