Bank of Mum and Dad may be running out of money

Bank of Mum and Dad may be running out of money

The "Bank of Mum and Dad" may be running out of money as parents are now providing smaller sums, according to research by Legal & General.

Forecasts from L&G and the Centre for Economics and Business Research found the average contribution from parents towards a child's mortgage deposit will decline from £21,600 in 2017 to £18,000 in 2018.

L&G's data found 316,600 property transactions in 2018 would rely on at least some help from parents, up from 298,300 in 2017.

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This means parents will give their offspring a total leg-up of £5.7bn in 2018 - less than the £6.5bn they gave in 2017 but still an overall increase on the £5bn in 2016.

Despite the fall predicted in 2018, the "Bank of Mum and Dad" will remain a big factor in the UK housing market, with 27 per cent of buyers forecast to receive help from friends or family.

Nigel Wilson, chief executive of L&G, said: “The Bank of Mum and Dad remains a prime mover in the UK housing market, and will lend the best part of £6bn to buyers this year, with over 315,000 transactions being underpinned by parental help.

"However, it’s clear that households are feeling the pinch, as contributions have reduced by an average of 17 per cent from nearly £22,000 to a still very generous £18,000.

"The fact that in 2018, one in four housing transactions in the UK will be dependent on the Bank of Mum and Dad, while hard-pressed parents are finding it more difficult to provide the funds to help their family with deposits, will further exacerbate the UK’s housing crisis.

"We need more homes for the young, old and families alike. Legal & General is playing its part by announcing an initiative to deliver thousands of new affordable homes."

Other key findings from the research found parental contributions were highest in London where they are almost £31,000 for each transaction on average and lowest in Scotland at just under £11,000.

Under-35s were most likely to receive parental assistance with nearly three in five receiving money from family and friends to buy a property. This drops to just 8 per cent for over-55s.

Kusal Ariyawansa, a financial planner with Appleton Gerrard, said: "My prediction is that the generosity shown by the babyboomers cannot be sustained by each subsequent generation - that the longevity and cost of care fees will decimate estates leaving the vast majority without an inheritance.

"Intergenerational planning is therefore vital to ensure assets are distributed in the most efficient manner and that donors have the ongoing financial peace of mind."