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Parents '10th biggest mortgage lender' | Parents '10th biggest mortgage lender' |
(35 minutes later) | |
The "Bank of Mum and Dad" is the 10th biggest UK mortgage lender as buyers increasingly rely on financial support from their parents, a report suggests. | The "Bank of Mum and Dad" is the 10th biggest UK mortgage lender as buyers increasingly rely on financial support from their parents, a report suggests. |
Parents will lend £6.5bn this year, according to insurer Legal and General, and be involved in 26% of all UK property transactions. | Parents will lend £6.5bn this year, according to insurer Legal and General, and be involved in 26% of all UK property transactions. |
This is up from the £5bn of lending estimated in L&G's equivalent survey a year ago. | This is up from the £5bn of lending estimated in L&G's equivalent survey a year ago. |
The average first-time buyer requires a deposit of about £26,000, lenders say. | The average first-time buyer requires a deposit of about £26,000, lenders say. |
Figures from the Council of Mortgage Lenders (CML) show that the average first-time buyer is 30 years old and borrows an average of £132,100. | Figures from the Council of Mortgage Lenders (CML) show that the average first-time buyer is 30 years old and borrows an average of £132,100. |
'Broken' market | 'Broken' market |
The L&G research suggests that parents will provide deposits for more than 298,000 mortgages. | The L&G research suggests that parents will provide deposits for more than 298,000 mortgages. |
Last year, it suggested that parental financial support made the Bank of Mum and Dad the equivalent of the 10th biggest UK mortgage lender, and this ranking has not changed. | Last year, it suggested that parental financial support made the Bank of Mum and Dad the equivalent of the 10th biggest UK mortgage lender, and this ranking has not changed. |
The proportion of property transactions that they are involved in has also been relatively static from a year earlier - but parents' gifts, loans or inheritance values have risen to an estimated average of £21,600 this year compared with £17,500 a year ago. | The proportion of property transactions that they are involved in has also been relatively static from a year earlier - but parents' gifts, loans or inheritance values have risen to an estimated average of £21,600 this year compared with £17,500 a year ago. |
Some 79% of this parental funding goes to property buyers aged under 30, L&G claims. | Some 79% of this parental funding goes to property buyers aged under 30, L&G claims. |
This is despite a price war between mortgage lenders, which has pushed mortgage rates down to historically low levels. However, lenders typically require a larger deposit than was the case before the financial crisis. | This is despite a price war between mortgage lenders, which has pushed mortgage rates down to historically low levels. However, lenders typically require a larger deposit than was the case before the financial crisis. |
Legal & General chief executive Nigel Wilson said: "Parents want to help their kids get on in life, and the Bank of Mum and Dad is a testament to their generosity, but it is also a symptom of our broken housing market." | Legal & General chief executive Nigel Wilson said: "Parents want to help their kids get on in life, and the Bank of Mum and Dad is a testament to their generosity, but it is also a symptom of our broken housing market." |
The research echoes the government's own English Housing Survey which showed that, in 2015, some 27% of first-time buyers relied on friends or family for help with a deposit. | The research echoes the government's own English Housing Survey which showed that, in 2015, some 27% of first-time buyers relied on friends or family for help with a deposit. |
Some have reacted to the L&G survey on social media pointing out that the Bank of Mum and Dad is simply inherited wealth. | Some have reacted to the L&G survey on social media pointing out that the Bank of Mum and Dad is simply inherited wealth. |
Others state their annoyance that such funding is only an option for some buyers, and should not be considered as a recognised source of mortgage deposits. | Others state their annoyance that such funding is only an option for some buyers, and should not be considered as a recognised source of mortgage deposits. |
Elsewhere, Mark Harris, chief executive of mortgage broker SPF Private Clients, said: "Money from parents must really be a gift rather than a loan as far as mortgage lenders are concerned, so that it doesn't impact the borrower's affordability. | Elsewhere, Mark Harris, chief executive of mortgage broker SPF Private Clients, said: "Money from parents must really be a gift rather than a loan as far as mortgage lenders are concerned, so that it doesn't impact the borrower's affordability. |
"Getting the correct legal documentation in place is also crucial, particularly if one set of parents is providing support to a young couple. Parents will want to protect their deposit gift if the couple split up so that it is returned to the parents and not split between the two parties. | "Getting the correct legal documentation in place is also crucial, particularly if one set of parents is providing support to a young couple. Parents will want to protect their deposit gift if the couple split up so that it is returned to the parents and not split between the two parties. |
"Parents who wish to maintain control over their savings may consider alternatives to simply handing them over." | "Parents who wish to maintain control over their savings may consider alternatives to simply handing them over." |
Where can I afford to live? | Where can I afford to live? |
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