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Ignore the Bank of Mum and Dad at your peril


Huge shifts in the economic landscape, the lack in supply of affordable housing, rising house prices and a fall in the accessibility of high loan-to-value loans have all combined to heighten the emphasis on additional financial support required by homebuyers.

And this is not just limited to first-time buyers.

Much of this extra help and support appears to be falling on the shoulders of parents and other family members. Last year housing charity Shelter suggested that UK parents collectively pay out around £2bn a year to help their children on to or up the property latter.

This is a huge figure – to put this into some perspective, it has been speculated that this exceeds the yearly amount spent by the Government on affordable housing.

Government initiatives such as the Help to Buy scheme have worked to help reduce some of the pressure on first-time-buyers and their parents.

Figures recently published by the Department for Communities and Local Government suggest that March saw 2,929 purchases through Help to Buy 1, taking the total number of purchases through the scheme to 19,394.

Help to Buy has certainly provided a welcomed boost but that does not mean it should be considered the be-all and end-all when it comes to supporting homebuyers.

It is clear that the purchase market is multi-dimensional and lenders have to appreciate and understand the amount of financial support required to fulfil a variety of property aspirations.

All of which means more product choice and support is needed, while obviously maintaining a responsible attitude to risk.

The problems facing buyers are emphasised in a recent study by Shelter and KPMG which predicted that future home ownership will be determined by inheritance rather than hard work and saving.

It also suggested that young people lucky enough to get a foot on the housing ladder will have to increasingly rely on the Bank of Mum and Dad.

It also highlighted that the proportion of young adults still living with their parents will pass the 50 per cent mark within a generation, unless radical action is taken to tackle Britain’s housing shortage.

Research from the latest Genworth Index also suggests that many UK adults are still relying on their parents to raise a deposit for their first home. 

The index found that four out of five adults see saving for a deposit as the greatest barrier to home ownership.

It’s evident that many challenges remain for an array of buyers and while intergeneration borrowing may not be the preferred or viable method for some, it is coming under serious consideration from more and more borrowers and family members in the right position to benefit/support.

And it is this rise in prominence which means the Bank of Mum and Dad will continue to come under greater scrutiny from growing numbers of lenders and is one which the intermediary market can ill-afford to ignore.

Andy Gray is managing director of mortgages at Barclays


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