Financial gifts from family members are now supporting a third of property transactions, new research from Legal & General has found.
This is expected to total some 318,400 transactions by the end of 2023, a third of the one million transactions predicted to get over the line by Zoopla. This is predicted to become 357,200 per year by 2025.
This is the busiest the “Bank of Family” has ever been. Traditionally dubbed the “Bank of Mum and Dad”, Legal & General say the new term “more accurately reflects the contribution of other members and the breadth and diversity of modern family structures”.
The value of financial support families will give, and the number of home purchases that this will help fund, have both “ballooned” over the last seven years, said Legal & General, whose research was conducted alongside the Centre for Economics and Business Research (Cebr).
Following a dip in lending during the pandemic, gifts “resumed [their] dramatic growth”. The average amount of Bank of Family money given by family is expected to hit £25,600 this year, while total lending is expected to climb to £8.1 billion in 2023, up 50% on 2020. The total value of properties bought with Bank of Family assistance is predicted to reach £124.6 billion this year.
Family contributions are set to climb to a staggering £10 billion by 2025, according to the research. This increasing reliance on financial support from parents, grandparents, other family, and friends underlines the challenges faced by aspiring buyers who don’t have access to this support, pointed out Legal & General.
Indeed, the majority of recent or prospective Bank of Family recipients said they would have to delay their home purchase without financial help from loved ones. More than one in five (21%) say they would have to delay their purchase by more than five years and one in 10 first-time buyers would not be able to buy a home without assistance from the Bank of Family.
“Family wealth is increasingly becoming a prerequisite for homeownership, effectively locking some groups out of the housing market for years while they save for deposits, or even altogether,” said Bernie Hickman, CEO, Legal & General Retail:
“While family gifting has always played a prominent role in the UK housing market, our study shows that the value of those contributions has risen by more than a quarter on pre pandemic levels.
An increasing reliance on family members isn’t only an issue for those seeking to buy – it is important to acknowledge the financial strain it can place on the giver, particularly if they are undertaking this commitment without financial advice. By dipping into savings and pensions, family members may be compromising on their own retirement incomes. A housing system which relies too heavily on gifted deposits not only perpetuates inequality today, but could create risks for the older generations of the future.”