The Bank of Mum and Dad has become the equivalent of the ninth-biggest mortgage lender in the UK in 2017, up from 10th place last year1. This comes as we discover that 46% of parents and grandparents have given financial support to their sons and daughters2. As a result; new mortgage products have gone on the market, that further enable older generations to help the first time buyers in their family.
Property Equity
The generation of baby boomers, aged over-55, is now passing from work age into retirement, and is sitting on an estimated £1.5 trillion worth of property equity3, in the UK. With the equity in their homes, older family members could be well placed to support younger family members, and aid them in getting onto the property ladder.
Higher Expectations of Financial Aid
Research undertaken by the Centre for Economics & Business Research reveals how parents, friends and family members will lend over £6.5 billion in 2017. This lending will enable the purchasing of homes worth £75 billion4.
The table below displays the share of prospective homeowners that expect to receive financial assistance towards a home purchase from family or friends. The table shows a marked increase in financial expectations from younger generations, compared to that of older generations.
| Age | Prospective home owners expecting financial aid |
| Under 35 | 52% |
| 35-44 | 38% |
| 45-54 | 31% |
| 55+ | 20% |
The data was sourced from a survey of over 1,000 UK adults commissioned by Legal & General in February 2017.5
What options are available?
This increasing demand for financial assistance, and subsequent pressure on parents to aid their children in owning their first property, has opened up a space in the mortgage market. This has been filled with new Family Mortgage products such as:
Guarantor Mortgages – where parents commit to paying the mortgage if their children default; providing an extra safety net for the lender6.
Offset Mortgages – which allows any savings to be set against the mortgage; reducing the interest paid on the net balance. A savings account is set up alongside the mortgage, and the money in the account is ‘offset’ against the mortgage.
Buy for Uni – this is a relatively new mortgage product, which provides a route onto the property ladder for young students. Immediate family generally provide security for the loan. You can read more about this product in our commercial blog on student accommodation.
Additionally, parents may wish to gift the deposit for a new home to their children. These new Family Mortgage products allow family members to release equity from their homes, which may have been previously tied up. Alternatively, it is possible to deposit the money into a mortgage lender’s account, in order to gift the deposit for a house purchase.
Together, these options provide some added flexibility and accessibility to borrowers purchasing a property. Some borrowers may also benefit from access to a potentially higher loan size, with the added mortgage security from family members7.
Those borrowing under these circumstances may well have particular requirements and circumstances. At Large Mortgage Loans, we arrange bespoke mortgage solutions, and will take the time to fully understand your circumstances and advise you best on which family mortgage option could work for you.
Additionally, Large Mortgage Loans has access to a wealth of lenders with flexible lending terms, who may be well placed to help you to achieve the borrowing you require.
Use our mortgage calculator to see how much, as a family, you could potentially borrow.
Your home may be repossessed if you do not keep up repayments on your mortgage.
- http://www.telegraph.co.uk/business/2017/05/01/bank-mum-dad-now-equivalent-ninth-biggest-mortgage-lender-paying/
- http://www.financialreporter.co.uk/finance-news/death-of-the-bank-of-mum-and-dad.html?utm_source=Email+Campaign&utm_medium=email&utm_campaign=11064-376430-Breaking+news+7th+August+%28FSE%29
- http://www.legalandgeneralgroup.com/assets/portal/files/pdf_263.pdf
- http://www.legalandgeneralgroup.com/assets/portal/files/pdf_263.pdf
- http://www.legalandgeneralgroup.com/assets/portal/files/pdf_263.pdf
- https://www.aol.co.uk/money/2017/07/25/one-in-five-banks-of-mum-and-dad-make-shocking-sacrifices/
- https://www.aol.co.uk/money/2017/07/25/one-in-five-banks-of-mum-and-dad-make-shocking-sacrifices/
