The “Bank of Mum and Dad” will help finance 25% of UK mortgage transactions this year, according to research.
Parents are set to lend their children £5 billion in order to help them get onto the property ladder. If the lending power of all these parents was combined, it would be a top 10 mortgage provider, the BBC said.
Nigel Wilson, chief executive of financial services firm Legal & General, which carried out the research, said the data showed a number of issues, including house prices being “out of sync with wages”.
The research estimated that the Bank of Mum and Dad will provide deposits for more than 300,000 mortgages. The homes purchased will be worth £77 billion and the average contribution is £17,500 or 7% of the average purchase price, the BBC said.
But relying on parental support might soon be unsustainable as parents could be giving away more than they can afford. Wilson said that in London the funding method was reaching “tipping point” already as parental contributions made up more than 50% of the wealth (excluding property) of the average household in the capital.
He said: “The Bank of Mum and Dad plays a vital role in helping young people to take their early steps on to the housing ladder.”
Not all young people have parents who can afford to help them and some who do still do not have enough to buy a place of their own, he said.
He added: “We need to fix the housing market by revolutionising the supply side – if we build more houses, demand can be met at a sensible level and prices will stabilise relative to wages.”