Having difficulty getting on the property ladder? It might be time to turn to the Bank of Mum and Dad.
According to recent reports, the Bank of Mum and Dad (parents who give or lend their children money to get onto the property ladder) is funding the purchase of properties through £6.5 billion in soft loans to their kids.
Parents Giving More than Ever
What makes this figure of £6.5 billion even more remarkable is that it is up from £5 billion just last year.
This is partly due to the increase in average contributions over the last year, up from £17,500 last year to £21,600 this year.
All that money is providing deposits for over 298,000 mortgages, and it is being used to fund the purchase of a massive £75 billion worth of property.
Funding 1-in-4 Property Purchases
Cebr and Legal and General came out with the research, which suggested that one-in-four purchases in the UK now involve parental funding.
This means the Bank of Mum and Dad is now providing the same amount of money as Yorkshire Building Society, which is the UK's 9th largest mortgage lender.
And who is receiving all this financial help? Mainly millennials, according to the research. 79 per cent of funding is apparently going to those aged under 30.
Why All the Help?
So why are parents helping out more? Part of the reason seems to be down to the fact that younger people now have fewer opportunities than their parents did.
This is especially the case when you look at property prices today compared to a few decades ago. Throw in the fact that they don't get a free university education, leading to large student debts, and it's easy to see why parents want to help out more.
Parents in the South West Give the Most
According to the research, the most generous parents are from the South West, where an average of £30,000 is given to children who want to get onto the property ladder.
This was above Londoners, who gave £29,400. Wales was at the other end of the list, with parents giving £12,500.
Tips for Saving for a Deposit
If you don't have the option of the Bank of Mum and Dad, you're going to have to save up a deposit to get onto the housing ladder.
Remember that you might only need as little as a 5 per cent deposit from some lenders. But how exactly do you get saving? Some options include:
- Go back and live with your parents
- Cut back on expenses
- Get a lodger
- Look into government schemes like Shared Ownership where you buy a part of your property and pay rent on the rest
- If you have savings, put them in a high-interest account
You might also want to look into the Help to Buy ISA. With this, you can earn tax-free interest, and the state then adds 25% on top of what you save. Here's a good guide to this to find out more about making your savings go further.