Gifts and loans from parents helping their children to get on the property ladder have made the ‘Bank of Mum and Dad’ one of the UK’s biggest mortgage lenders, according to research.
According to Legal & General, the average parental contribution for homebuyers this year is £24,100, up by more than £6,000 compared to last year. In total, UK parents have given £6.3 billion, high enough to rank the ‘Bank of Mum and Dad’ 10th if it was a mortgage lender.
This would place it £500 million behind Virgin Money, the UK’s 9th largest mortgage lender, and £1.3 billion ahead of Clydesdale Bank, which is 10th. Legal& General’s research, which is based on a poll of 1,600 parents, found that almost a fifth said they were helping because they ‘felt a personal responsibility to do so’.
But it warned that parents’ generosity could hurt their standard of living in retirement. Although over half of parents are using cash to help their children, others are withdrawing money from their pensions, or considering using equity release from their homes. 15% said they had already accepted a lower standard of living as a result of helping their children.
Commenting on the research, Chris Knight, Chief Executive of Legal & General’s Retail Retirement Division, said: ‘Housing wealth has the potential to play a hugely transformative role for both Britain’s retirees and the next generation of homeowners.
‘Many are using their pensions and savings to help out and unfortunately this could be leaving some facing a poorer retirement, especially if they don’t get the right advice. The generosity of parents and grandparents is inspiring, but many are making big financial decisions without adequate planning or professional advice.’