With the Bank of Mum and Dad (BOMAD) equivalent to the ninth biggest mortgage provider in the UK
, when it comes to enabling home ownership new research shows that when your parents own a home, you’re 3 times as likely to have bought a property by aged 30.
This isn’t the only advantage – those with home owning parents are 74% more likely
to have a degree, and usually earn around £500 more per month.
The research by the Resolution Foundation
shows that parental wealth is a significant driver in home ownership for young people, becoming almost as important as how much the potential buyers earn themselves.
There are multiple elements to be considered here – not only that ‘property prosperous’ parents can often offer financial support to their children, but that there is a level of expectation
on them to buy.
It may be that for those with home owning parents, buying a property is ‘the norm’ and as such it’s an ongoing financial goal. For those whose parents don’t own, there may be less expectation, especially as growing house prices and stagnant wages can make getting a mortgage more difficult, and a deposit harder to save for.
Whilst parental support, understanding of the process and expectation probably do have a part to play, it’s the Bank of Mum and Dad that takes centre stage again. Owning a property can suggest that the parents have more money going into savings (with owning a property costing less than renting
) or that they could release equity from their property
to give their kids a deposit.
There are also the other elements of assistance home owning parents can offer alongside a deposit – like allowing adult children to return home, which might not be possible when renting. Various mortgages and guarantor schemes use a parental house as collateral
to help younger buyers.
If this difference in the likelihood of ownership between the parents of owners and renters continues to grow, it’s worth looking to the future. Will millennials be able to own in spite of their parental prosperity, or will they too become the renting parents, with this pattern passing down to the next generation?