Parental Bank, or Bank of Mum and Dad, Disburses £38.5 Billion to Homebuyer Offspring... Over a Span of Four Years
Parental pockets are emptied to the tune of nearly £40 billion, helping children own properties over the last four years, recent reports suggest. The so-called Bank of Mum and Dad handed out £9.6 billion in 2024, a figure that's higher than the previous year and even surpasses the record set in 2021 during the pandemic house price boom.
According to Savills, a staggering 173,500 first-time buyers received help from their folks last year, averaging a substantial £55,572 per individual. This assisted purchase average accounted for over half of all first-time buyers - a proportion that's lower than 2023 but still significantly higher than any year since 2012.
Lucian Cook, head of residential research at Savills, attributed this increased parental support to a stricter mortgage market and higher interest rates. He explained that due to these circumstances, a greater number of buyers find themselves in need of assistance to step onto the property ladder.
Last month, approximately 30,788 gifted house deposits worth £100,000 or more were documented. Among these beneficiaries, 29% received deposits equaling or exceeding £100,000.
Cook further noted that the first half of 2021 witnessed an unparalleled number of first-time buyer activities due to attempts to finalize deals before stamp duty thresholds modifications in March. However, he expects this activity to drop in the coming months, as buyers have shown less urgency to wait for lower rates.
Good news for potential buyers is that mortgage rates have been dwindling, with the Bank of England predicting three or four interest rate cuts this year instead of just two. Many lenders have responded by reducing their rates, with the lowest now hovering comfortably under 4%.
Looking ahead, Cook anticipates a decrease in the amount of support provided by the Bank of Mum and Dad, thanks to lower mortgage rates and lenders easing their affordability rules, enabling buyers to borrow more.
This relaxation of mortgage stress tests should boost first-time buyer activity, but the cost per first-time buyer may decrease as a result. The requirements for parental help differs from region to region, with London and the South East having the highest average deposit-to-income ratio (138%), making it extremely difficult for buyers to purchase properties independently.
- Despite the significant assistance from the Bank of Mum and Dad, the stricter mortgage market and higher interest rates have led to a greater number of first-time buyers seeking help.
- The average amount provided by the Bank of Mum and Dad to assist first-time buyers was approximately £55,572 last year.
- In recent years, nearly £40 billion has been emptied from parental pockets to help children own properties, according to reports.
- The pandemic house price boom in 2021 saw a record-breaking £9.6 billion handed out by the Bank of Mum and Dad, surpassing the previous year's figure.
- With the Bank of England predicting three or four interest rate cuts this year, mortgage rates have been decreasing, with the lowest now under 4%.
- As mortgage rates decline and lenders ease their affordability rules, Cook anticipates a decrease in the amount of support provided by the Bank of Mum and Dad, potentially leading to a decrease in the cost per first-time buyer.
