It is now the UK's ninth largest mortgage lenderby David Hagarty / May 23, 2017 / Leave a comment
Britain’s main political parties are in agreement that the UK has a broken housing market and that a bold solution is needed—before the housing crisis gets much worse.
Of course, it’s already causing serious problems. Legal & General’s “Bank of Mum and Dad” report puts the blame squarely on the supply side, saying in its media release that: “we are simply not building enough houses. We need to build more homes for the young, old and families alike, more quickly and cost effectively.”
The squeezing of the supply of new homes means house prices have risen to unaffordable levels, up by more than 300 per cent in England over the last 20 years. First time buyers are suffering the most. The report shows that two thirds of those under 30 have received financial help from friends and family to get on the housing ladder. Incredibly, the Bank of Mum and Dad (BoMaD) is now the UK’s ninth largest mortgage lender and will provide over £6.5bn in payments in 2017, up from £5bn in 2016. This generosity will fund deposits for nearly 300,000 mortgages, allowing homes worth £75bn to be bought.
A symptom of the problem, not its solution
The report describes how the Bank of Mum and Dad continues to grow in importance in helping young people take their early steps onto the housing ladder. The intergenerational inequality that creates the demand for BoMaD funding continues to widen—younger people today don’t have the same opportunities that the baby-boomers had, including affordable housing, defined benefit pensions and free university education. 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.
The report pulls no punches in describing the BoMaD as a result “of the problems in the UK housing market, not its solution.” It recognises that UK social inequality means that it fails to address the needs of “aspiring home-owners who work hard but cannot afford a deposit and don’t have friends and family able or willing to help.
A postcode lottery of differing levels of help
You’d expect the contributions towards house purchase to be higher in…