With wages failing to keep pace with soaring house prices, a growing percentage of young UK adults are being forced to rely on their parents to help them buy – or even rent – their homes.
Recent research reveals that the “Bank of Mum and Dad” helps finance approximately 25% of UK mortgage transactions each year. This means UK parents are lending their children £5bn (R94bn) each year to help them gain a foothold on the property ladder. Combining their lending power would make the “Bank of Mum and Dad” one of the top 10 mortgage providers in Britain.
A recent government housing survey reveals that the number of first-time buyers who rely on the “Bank of Mum and Dad” has risen sharply over the past decade – with 27% of first-time buyers relying on family or friends to assist them with a deposit last year. In addition, more people are using inherited money for their first purchase while a growing number are teaming up with a partner.
Despite government programmes like Help to Buy, the total number of first-time buyers has fallen by a third during the past decade, while the average age of people buying their first home has risen from 30 to 33 years during that period.
“Recent research reveals that the “Bank of Mum and Dad” helps finance approximately 25% of UK mortgage transactions each year”
Britain’s housing crisis is becoming so severe that the “Bank of Mum and Dad” is increasingly being forced to assist young adults in the private rentals market as well.
It is estimated that parents are subsidising their adult children’s rent to the tune of £1bn (R19bn) a year – with 450 000 UK adults requiring parental assistance to remain in their rented homes.
Research suggests that the combination of declining homeownership levels and escalating rentals mean that today’s millennials will pay an estimated £53 000 (R1 million) in rent before their 30th birthday. In contrast, the baby boomers (those born between 1946 and 1965) typically spent £9 000 in today’s money.
Just under two-thirds of baby boomers owned their own home by the time they reached the age of 30, compared with just 42% of the millennial generation.
The housing crisis will be a top priority for the UK’s new Prime Minister, Theresa May, as the critical shortage of genuinely affordable homes means that for millions of people finding a home is fast becoming out of reach.
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