It’s a well known factor that the BOMAD, Bank of Mum and Dad is one of the biggest lenders to first time buyers, this year they are expected to loan their children around £6.5 billion pounds in order to buy a property. But parental loans don’t just stop there, this large UK lender is expected to lend in the region of £2.3 billion to children who are having to rent, giving a grand total of around £8.8 billion loaned to children to afford to live in a property. This new research comes from the Legal and General and the Centre for Economics and Business Research (Cebr) who state that this figure covers a total of 9% of renters and almost 460,000 rental properties nationwide.
The main reason for this extra pressure on parents having to fund properties for their children comes from a lack of affordable housing, rising rents, low wage growth. The only way to counterbalance this would be for their to be more home building in the UK.
Dan Batterton, fund manager, Build to Rent at LGIM Real Assets, explains: “Legal & General has been tracking the role of the Bank of Mum and Dad for some years now – but this is the first time we’ve looked at its role in the rental market and the results are concerning. It is a real challenge for young people who are reliant on parental handouts just to make the rent.”
The intergenerational inequality that creates the demand for Bank of Mum and Dad funding continues to widen and now it’s affecting renters too.
He adds: “The lack of affordable housing, low wage growth relative to inflation and burdens of student debt mean that many kids can’t even rent somewhere without significant contributions from their family. Parents want to help their kids get on in life, and the Bank of Mum and Dad is a testament to their generosity, but it is also a symptom of our broken housing market.”
It is expected that the BOMAD will continue to play a significant role in funding properties for their children over the next few years.