The Bank of Mum and Dad (BoMaD) is gearing up to be a driving force behind the post-lockdown recovery in the UK’s housing market, as parents and grandparents prepare to put their hands in their pockets to help younger family members onto the housing ladder. Despite a fall in such family lending during the pandemic, nearly a quarter of housing transactions will be backed by BoMaD in 2020, according to new research from Legal & General and Cebr.
Although the Bank of Mum and Dad will fund 85,000 fewer home purchases this year, after the housing market effectively shut down during the lockdown period, family members are still expected to fork out £3.5bn. In total, it’s anticipated that such support will be involved in 175,000 housing transactions, with a total estimated value of £50.3bn, as BoMaD steps in after mainstream lenders restricted the low-deposit mortgage options many young people rely on in the wake of the pandemic.
The figures highlight the plight of families being squeezed by high property prices. Parents and grandparents have increasingly been forced to help the next generation buy their first home as the limited supply of housing has pushed up prices beyond the reach of many young people. And while the older generation is determined to be generous, giving away large sums is damaging the retirement hopes of many, while younger people without such support are being forced out of the market altogether.
Legal & General CEO Nigel Wilson says: “Whilst the generosity of the Bank of Mum and Dad is undoubtedly helping hundreds of thousands of loved ones to realise their homeownership goals every year, it remains a symptom of our broken housing market. Our reliance on BoMaD is unfair and unsustainable, and it’s putting retirements at risk as parents and grandparents try to help their kids to have a similar standard of living as they enjoyed.
“In order to make a meaningful difference and to create a fair and long-lasting market dynamic, we need to become a housebuilding nation once again. Thousands of new and affordable properties, across a variety of tenures, are needed to give everyone a fair chance at homeownership. At Legal & General we are playing an active role in delivering this, investing in infrastructure and jobs, as well as delivering housing for all ages, social groups and tenures. The housing market has long been at the heart of our nation’s economy, and now more than ever, we need to invest in this sector in sustainable way if we really want to support the UK’s wider return to growth.”
Legal & General already delivers high-quality build-to-sell, build-to-rent and affordable housing, as well as specialist housing for the elderly. Our affordable housing business alone has used pension money to secure a pipeline of 3,500 new affordable homes on 41 sites, valued at £750m. And we aim to build 3,000 affordable homes annually by 2023. We’ve even invested in our own modular housing factory to manufacture homes, bringing innovation to tackle the problem.
Building a variety of different kinds of homes is essential for a healthy housing market. When there are bigger properties for families to move into, it frees up smaller, affordable properties, and when older people move to later living communities, big family homes often become available. In addition to our affordable homes business, our premium housebuilder CALA Homes built 2,500 properties across 91 sites last year, while our growing later living business, Inspired Villages, already has more than 1,000 homes across six sites. In addition, last year also saw nearly 5,000 build-to-rent homes completed, in planning or under development.