Lending soars at Bank of Mum and Dad
The Bank of Mum and Dad has been branded as socially divisive and a symptom of Britain’s broken housing market as new figures reveal it is now one of the UK’s biggest mortgage lenders. Thousands of over-55s are generously gifting money as part of the Bank of Mum and Dad, using savings and even pensions to help their family onto the housing ladder, research has revealed.
However, the new data also shows that many people could be accepting a more uncertain retirement after financially supporting family members to buy a home. These latest findings follow earlier research which showed that this year, the average Bank of Mum and Dad contribution has risen by more than £6,000 to £24,100. The rise means that the Bank of Mum and Dad is now the equivalent of a top-ten UK mortgage lender, gifting a total of £6.3 billion in 2019.
Supporting loved ones to buy a home
Parents and grandparents across the UK are overwhelmingly in favour of supporting their loved ones to buy a home. More than half (56%) of the Bank of Mum and Dad lenders who have or would consider helping family to purchase property said they are willing to because ‘it was a nice thing to do’. Almost another fifth (19%) said they feel it’s their personal responsibility to help out.
The research also shows that when it comes to gifting money, the Bank of Mum and Dad is drawing on a wide range of sources to financially support other family members with a deposit. Although more than half are using cash (53%), 9% are cashing in lump sums from their pension savings, 7% are using their pension drawdown, and 6% are drawing on their annuity income to help support their loved ones’ homeownership ambitions.
Digging ever deeper into retirement savings
Despite this generosity, digging ever deeper into their retirement savings is leading some over-55s into a more uncertain retirement. Over a quarter (26%) of Bank of Mum and Dad lenders are not confident they have enough money to last retirement after helping their loved ones, and 15% have had to accept a lower standard of living. A small number (6%) are even choosing to postpone their retirement.
However, the Bank of Mum and Dad research has also revealed that consumers are increasingly considering other solutions that can help them to support family members but also pay for the retirement they want to lead. Unlocking housing wealth with equity release is becoming more popular with the over-55s, and many are now using the money to help with a deposit.
Housing wealth to fund home renovations
16% of Bank of Mum and Dad lenders have or would release equity and use that money to financially support their children or grandchildren. This makes it the third most popular source of funds for the Bank of Mum and Dad. But Bank of Mum and Dad lenders are using these funds to help with their own retirement ambitions too.
More than a quarter (26%) would or have used their housing wealth to fund home renovations, and nearly three in every five (58%) parents and grandparents are using it to free up cash to stay in their own home. Across the over-55s surveyed who haven’t released property equity already, well over a quarter (29%) said they would consider drawing equity from their home with a lifetime mortgage. τ
 Legal & General and Cebr 27.08.19