Yahoo Finance 'Bank Of Mum And Dad' To Fund 25% Of Mortgages
The 'Bank of Mum and Dad' will pump £5bn into mortgages to help their kids this year, according to a report which blames weak wage growth versus soaring house prices.
Legal & General (LSE: LGEN.L - news) (L&G) said parental aid would help finance 25% of UK mortgage transactions - making mums and dads a "top ten" lender.
The financial services firm estimated they would provide deposits for more than 300,000 mortgages, purchasing homes worth £77bn.
But the report warned that relying on parental support might soon be unsustainable as parents could be giving away more than they can afford.
A separate study by the National Institute for Economic and Social Research (NIESR) also identified risks to pensions and savings from the housing market.
The FT reported it said that rising house prices were diverting investment in retirement, with purchasers using a mortgage receiving about 15% less pension income than those who do not, on average.
L&G pointed to the disparity between wage growth and house prices - with the latest official figures showing average annual pay rises of around 2% currently at a time of house price increases of 7.6%.
Its report said parental contributions already made up more than 50% of the wealth of the average household in London when property was excluded.
It (Other OTC: ITGL - news) described that scenario as a "tipping point" - adding: "Families clearly cannot continue to use all of their net wealth to help their offspring onto the housing ladder without putting their own financial stability at risk".
Nigel Wilson, the company's chief executive, said: "The generosity being displayed by UK families doesn't make up for intergenerational unfairness - younger people today don't have the advantages the baby-boomers had, including cheap housing that delivered windfall gains".
He added: "We have a supply-side problem in housing - we are simply not building enough houses. We need to build more, especially as the Bank of Mum and Dad could soon start to experience a funding crisis of its own".
