Expanding Support: Beyond the Bank of Mum and Dad

After the Bank of Mum and Dad where parents dig deep to help to finance their adult children’s house-buying aspirations, a newer phenomenon is on the increase – that of the Bank of Family.

In this a wider cohort of close family members club together to help their relatives gain a foot on the property ladder by providing the financial support that they need to put a deposit together.

What’s happening?

The Bank of Mum and Dad has long supported First Time Buyers, with one in four homebuyers under 25 relying on help from their parents to buy their first property. But now, First Time Buyers are seeking help from wider members of their family – including grandparents and even siblings – in order to raise the money they need for a deposit for their first property. In fact, the Bank of Family is forecast to support a record number of First Time Buyers in 2023.

Why is this trend occurring?

With the cost-of-living crisis, high inflation, and increasing interest rates impacting mortgage rates the demands on everyone’s finances are getting tougher. Together with the lack of affordable housing, getting on the property ladder is now even harder without family support and it’s increasingly requiring more people to chip in.

According to Zoopla, the average deposit paid by a UK First Time Buyer for a three-bedroom home in 2023 is £34,500 for a property worth £240,000. It’s cash that many simply don’t have to hand without additional financial help from their loved ones.

How are relatives supporting each other?

Research from Legal & General says that relatives are expected to support 318,400 property purchases in the UK this year. Nearly half of these (47%) involve buyers under the age of 55. It predicts that family members will fund homebuyers to the tune of £8.1 billion this year, up 50% on 2020, with an average of £25,600 going towards each transaction. This overall figure is expected to rise to £10 billion by 2025. In 2016, when the research was first carried out, total lending was £5.3 billion and despite a dip during Covid lockdowns family contributions have continued to rise significantly since then.

The Legal & General study suggests that 186,700 homes have been, or will be bought with parental assistance this year; 39,800 thanks to grandparents helping out, and 91,900 helped by funds from other family or friends.

Meanwhile, other research also recently published and based on analysis of mortgages granted by Skipton Building Society shows that almost a third (32%) of First Time Buyers have turned to family to help fund their deposits. Of these 72% have received money from parents, a figure that is down from 80% in 2018.

Meanwhile, sibling assistance - where brothers or sister who are perhaps already established on the property ladder or simply earn more help out by contributing to First Time Buyer deposits - has increased over the period, nearly doubling from 6% to 11% with the median deposit gifted by siblings coming in at £10,520.

While half of parents and grandparents use cash savings to help their relatives, the Legal & General research suggests that 1 in 8 downsize to release the funding needed, suggesting that they could be risking their own financial futures in doing so.

Other support

Not all the financial support comes from family handing over cash, however. The Legal & General research suggests that 77% of buyers received funding for their deposit but others saved up their own money by living with parents or other family members rent-free to enable this.

The scale of support also varied by region. In London, more than two-thirds of buyers received financial help from family with an average of £30,200 contributed. This was topped by the East of England where family contributions accounted for an average of £32,100. The lowest family contributions were in East Midlands (an average of £20,000) and West Midlands (an average of £19,800).

Those who can’t turn to family to financially support them may have to wait longer to buy while they save to get a deposit together. And the delay and impact of this is significant. More than one in five respondents (21%) said they would have to delay their purchase by more than five years without family assistance, while one in ten said they wouldn’t be able to buy at all without the Bank of Family supporting them. 
 
Getting help from a family member, it seems, can be the catalyst to turn getting on the property ladder from a pipe dream, into a reality.