(qlmbusinessnews.com Mon, 28th Aug, 2023) London, UK —
An unprecedented surge in individuals seeking assistance from their families to realize their dream of homeownership has been uncovered by a recent study.
Legal & General (L&G) suggests that the “Bank of Family” is set to facilitate around 318,400 property acquisitions this year.
Approximately 47% of homes purchased by individuals under the age of 55 are anticipated to be secured with financial backing from parents, grandparents, or other relatives.
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However, L&G cautions that those without such familial support could face difficulties accessing the property market.
For the past seven years, the financial services group has been monitoring the extent of family assistance in property purchases. It has now revealed that in 2023, a greater number of people than ever before are reliant on relatives for deposit assistance.
Previously referred to as the “Bank of Mum and Dad,” the term has been updated to “Bank of Family” to more accurately reflect the contributions coming from a wider range of relatives, including grandparents, and to acknowledge the diversity of modern family structures.
The study indicates that the average sum provided by family members to their loved ones is projected to reach £25,600 this year, with total lending predicted to reach £8.1 billion. By contrast, in 2016, when the research was first conducted, total lending stood at £5.3 billion.
Parallel research conducted by Hamptons estate agents and Skipton Building Society suggests that siblings are becoming increasingly prominent sources of funding. Siblings now constitute a record 11% of family members contributing to deposits for first-time buyers, up from the 5% recorded five years ago. On average, siblings provide a donation of £10,250.
L&G underscores the faster pace of house price growth relative to wage increases. Coupled with rising living costs and interest rates, the ability to acquire property without family support is becoming progressively challenging.
Bernie Hickman, Chief Executive of Legal & General Retail, acknowledged the widening circle of family support: “Whilst the majority are mums and dads helping out, also grandparents, aunts and uncles and even friends of the family are helping out as well… in ever increasing amounts of generosity.”
However, he also noted the flip side of the trend, emphasizing that the lack of family assistance could pose significant hurdles to entering the property market.
Hickman highlighted that families are offering more than just financial support. Non-financial assistance includes allowing adult children to reside at home without paying rent while they save for their own property deposit.
According to L&G's survey, one in five respondents stated that without family support, they would have to delay their property purchase by over five years, and one in ten indicated they would be unable to purchase a home at all.
Mr. Hickman pointed out that “Family wealth is increasingly becoming a prerequisite for homeownership, effectively locking some groups out of the housing market for years while they save for deposits, or even altogether.”
The study also reveals regional variations in the extent of family assistance. In London, over two-thirds of individuals received family help in purchasing their homes, with an average contribution of £30,200. The East of England recorded the highest level of assistance, with an average of £32,100.
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Conversely, the East Midlands had the lowest average family contribution at £20,000, followed closely by the West Midlands at £19,800.
Recent housing surveys have indicated a decline in house prices over the past few months. Last week, the Halifax reported that the average UK home cost 6.7 times the annual earnings of a full-time worker, down from a record of 7.3 times a year prior. While this could be advantageous for first-time buyers, the affordability of a typical home remains less favorable than pre-pandemic levels, and rising interest rates are consuming a larger share of incomes through mortgages.
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