Bank of Mum and Dad not just buying homes - but now funding rents too
Parents are not only enabling home ownership for their children but are also playing a pivotal role in the rental market. On top of the £6.5bn parents are forecast to pay out this year in deposits and mortgage repayments on behalf of their children, the Bank of Mum and Dad will fund £2.3bn of rental payments this year, helping 9% of renters across the UK with their rent on nearly 460,000 properties¹.
One in ten renters have also used parental money to pay for deposits, moving expenses and letting agent fees. A quarter of those aged 25-44 said that they had received help from a parent to pay rent. Unsurprisingly, the Bank of Mum and Dad’s rental contributions are highest in London and the East of England, lending £626m and £604m in these areas respectively.
Previous research also found that the bank of mum and dad was equivalent to the ninth biggest lender, lending the same amount as Yorkshire Building Society. This year’s total is up 30pc on last year. Earlier this year, the Social Mobility Commission found that 34pc of first-time buyers were using a gift from family or friends to help them purchase property.
This brings the total payout to roughly £8.8bn this year, and helping a combined 938,000 properties with either rent or payments for a mortgage or deposit.
Richard Davies, Head of Lettings, Chestertons comments:
“The lack of affordable/social housing, low wage growth relative to inflation and burdens of student debt mean that many young adults can’t even rent somewhere without significant contributions from their family. Rents are often much higher than mortgage repayments, particularly due to low interest rates, so whilst it’s not surprising that the ‘Bank of Mum and Dad’ is being called upon even more, it is concerning.
There have been significant changes which have impacted landlords over the last eighteen months, from additional stamp duty to the most recent changes in tax liability. Should some landlords choose to exit the sector then this would be bad news for tenants and the private rented sector as a whole, resulting in further lack of supply which would drive further increases in rental levels.
If the Government wishes to alleviate the housing crisis, they may wish to consider supporting buy-to-let landlords rather than risk either driving them from the market or forcing them to increase rents to maintain viable businesses.”
¹ Source – Legal & General & Centre for Economics and Business Research