Views on the Bank of Mum and Dad

With rents rising and average income to house price being around 6.5x, is it any surprise that FTB and home movers still rely on the bank of mum and dad. Is it a bad thing? it is so common now it seems like it is part of the process. The problem with the bank of mum and dad is the complications it can cause if couples split up and no legal protection has been put in place, this is where a good advisor should be explaining the risks and advising you speak to solicitors.
The bank of mum and dad is going to be ever present until the house price to average income reduces.

Bank of Mum and Dad is a major force in the UK housing market, if this did not exist then many clients would simply not be able to afford to buy a property. In the majority of cases this support mainly extends to putting a deposit down in order to initially purchase a property.

Many First Time Buyers have had to turn to the 'Bank of Mum and Dad' over the last 5 years, due to the increasing price of properties across the country.
The disparity between incomes and the price of property has become such, that an average house price in the UK is around £288,000, and a 10% deposit is over £28,000, which for anybody takes some saving alongside the legal fees, and survey fees etc.
With the cost of renting a property being so high and rents increasing, it puts financial pressure on first-time buyers to, pay bills, pay their rent and try and save, which is very difficult.
In the majority of cases, I see they are illustrating affordability and showing a track record of this, by being able to pay the rent, bills etc. Having the 'Bank of Mum and Dad' seems almost essential if first-time buyers have already had to move out and are paying rent, it is slightly easier if they are still at home as it tends to provide a slightly higher disposable income to save for a deposit.

The Bank of Mum and Dad has been a great source of deposits for many first-time buyers as property prices have marched upward, making even a 5% deposit a substantial chunk of cash for people to save up. However, it not only creates a bigger gulf of inequality between those whose parents can afford to do this and those who cannot, but it also puts a huge amount of pressure on the parents, who can feel that if they don't provide their children with a £20000 or £30000 leg-up onto the property ladder, that they are somehow bad parents. Add this to the support that many will have given to their children through university and the fact that most will have multiple children to support in this way, and very quickly you are asking parents to have a huge income - or more likely to forego their own financial security by taking further borrowing on their own homes, or raiding their retirement funds.

It is becoming increasingly evident that the "Bank of Mum and Dad" is no longer a boost but rather a nearly essential step, in the home-buying process for many first-time buyers. This trend, fueled by skyrocketing property prices and a disparity between incomes and home values often involves parents assisting with payments. However, this practice does have its downsides; it can contribute to inequality, jeopardise parents financial stability and even complicate relationships if not approached with foresight. It presents a multifaceted solution to a problem emphasizing the pressing need for balanced housing affordability, in the United Kingdom.

I'm all for using the bank of mum and dad if you are lucky enough to have the option as they very often are willing to help. My advice to all first-time buyers is to be tactful and ask this:

'Hey parents, we're looking to buy a house and ideally we'd love to be able to do it on our own. It's very expensive though and we'd obviously really appreciate any support you can provide to make our lives a bit easier so if you can help out we'd be very grateful. And if you can't that's ok too but we wanted to ask.'

We find most people are surprised at how helpful their parents are willing to be. If us mortgage brokers know as early in the process as possible we can build it into our advice.

The Bank of Mum & Dad or indeed Gran & Grandad is very much active and in our opinion needs to remain so - First-Time-Buyers have a limited chance of getting on the ladder without such assistance from relatives. We often use gifts from relatives of deposit monies alongside Shared Ownership which makes it possible for applicants to reach a potentially out of reach larger property size e.g. upsizing from 2 - 3 bedrooms etc. Older relatives have been lucky to have managed to get on the market in times when massive income-to-loan multiples weren't necessary for applicants when buying their first properties, so assisting now younger relatives is a very much-needed activity.

The bank of mum and dad comes into play into the majority of first time buyer mortgages we see. Whether that’s gifted deposit or gifted equity.

The reality is, most younger people need that help to stand any chance of purchasing at today’s prices, especially when you factor in student loan repayment, credit card debt and car finance.

Will they ever be able to stand on their own? Who knows?