The so-called “bank of mum and dad” is forecast to lend £6.5 billion to their children to help them climb aboard the property ladder in 2017. The report by Legal and General and economics consultancy Cebr casts a very interesting light on the UK property market and funding options available. So, will bank of mum and dad really lend £6.5 billion to their children in 2017?
Increase on 2016 figures
Before we look into the situation regarding an ever greater funding requirement from the bank of mum and dad, it is worth noting that the £6.5 billion figure for 2017 would be a 30% increase on the £5 billion loaned in 2016. As a consequence, parents will be involved in more than one in four UK property transactions in 2017 and this figure is set to grow in the short to medium term. To put this in perspective, the £6.5 billion in question matches the mortgage lending of the U.K.’s ninth largest mortgage company, Yorkshire Building Society. Are we really at a situation where the bank of mum and dad is now one of the top 10 mortgage lenders in the UK?
Funding for more than 298,000 mortgage deposits
When we tell you that the bank of mum and dad will be providing deposits for more than 298,000 mortgages in 2017, this will certainly catch the attention of many people. It is also worth noting that the deposits in question will help to fund property purchases worth a staggering £75 billion in 2017. It does beg the question, without the bank of mum and dad are there really any funding options for those on lower incomes when it comes to climbing aboard the UK property ladder?
For many years now experts have been begging governments to increase the number of new properties built each and every year. We all know that the industry is behind the curve of newbuilds, we all know that demand is pushing prices higher and higher so why is nothing being done?
Yet more political shenanigans
Each and every political party in the UK does at this moment in time support increasing the number of newbuilds. From the Conservatives to the Labour Party, from the Liberal Democrats to the SNP, there is growing demand for a significant rethink about how the future UK property market should be structured. However, with all their huffing and puffing, how many political parties have actually put forward new suggestions? How many have demanded a legal requirement for governments and the construction industry to build a set number of newbuilds each year?
The truth is that the politicians will promise the earth only for many of these promises to fall by the wayside once they reach office. It would be wrong to suggest that the Conservative government has not invested money in newbuilds across the UK but progress is painfully slow. While the details of many schemes are debated time and time again, more and more people are struggling to climb aboard the UK property ladder with many now needing assistance from the “bank of mum and dad” as we covered above. When will the politicians finally act?