BOMAD now ninth biggest mortgage lender

Research by Legal & General and the Centre for Economics and Business Research consultancy has found that the Bank of Mum and Dad (BOMAD) will lend more than £6.5bn this year, funding more than a quarter of house purchases as young people and first-time buyers struggle increasingly to get on the housing ladder.

This figure, up from £5bn last year, makes BOMAD the equivalent of the ninth biggest mortgage lender, ahead of Clydesdale Bank, and a whisker behind Yorkshire Building Society.

Parents provided, or contributed towards, deposits for more than 298,000 mortgages last year – 26% of transactions – typically parental contributions are used as a deposit, rather than helping with mortgage repayments; the vast majority, 70%, is used by millennials under the age of 30.

Nigel Wilson, chief executive of Legal & General which commissioned the study, said: ‘The Bank of Mum and Dad continues to grow in importance in helping young people take their early steps onto the housing ladder.

‘The intergenerational inequality that creates the demand for BOMAD funding continues to widen – younger people today don’t have the same opportunities that the baby-boomers had, including affordable housing, defined benefit pensions and free university education.

‘a symptom of our broken housing market’

‘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 number of purchasers receiving help from family and friends has risen sharply in the last year, jumping from one third in 2016 to 42% this year.

The average sum advanced from BOMAD has also risen dramatically – up 23% to £21,600 in 2017; at number nine, the mythical lender is up one place in the table.

Mr Wilson added: ‘The UK is experiencing a supply-side crisis in housing – we are simply not building enough houses. We need to build more homes for the young, old and families alike – more quickly and cost effectively.’

However, whilst the amount lent, or gifted, has shown a year-on-year increase, the total number of properties purchased using this cash will fall in 2017 because the housing market has slowed due in no small part to uncertainty following the UK’s decision to exit the EU; however, basic dynamics of supply and demand suggest that this will be nothing other than a short-term phenomenon.

See also:

BOMAD to lend to other people’s children?  – DIY Investor

Bank of Mum and Dad to review lending policy? – DIY Investor