But how crucial is its role, and what does that tell us about the state of the housing market? This blog explains.
What is the Bank of Mum and Dad and how important is it?
The ‘Bank of Mum and Dad’ is the informal description for parents lending money to their children to help them buy a house.
The role of the Bank of Mum and Dad is already huge, and it’s growing. Some key facts:
- £6.5 billion will be borrowed from family and friends to help fund house purchases in 2017.
- 298,300 people will borrow an average of £21,600 each.
- 42% of all prospective home owners in 2017 will rely on the Bank of Mum and Dad to some degree.
- 79% of the under 30s will rely on the Bank of Mum and Dad this year.
The numbers are staggering. In fact, the Bank of Mum and Dad is now one of the 10 biggest mortgage lenders in the UK.
Why does its role tell us about the housing market?
The Bank of Mum and Dad isn’t growing in importance because parents are more generous than they used to be. Instead, it’s a symptom of a wider problem – the lack of affordability in our housing market.
House prices in England and Wales have been rising for decades. As the graph below of Land Registry data shows, the average price of a home is almost double what it was just 12 years ago.
As prices rise, so affordability is getting worse too. By 2015 average house prices were more than six times average incomes – the same ratio as before the housing market crash in 2007, and an all-time high.
Yet people still need somewhere to live, and still aspire to own their own home. That’s where the Bank of Mum and Dad steps in.
The reason for this lack of affordability is clear. As Nigel Wilson of Legal and General puts it in the report: “The UK is experiencing a supply-side crisis in housing – 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.”
Its one of the reasons we are in the midst of a housing crisis.
What does this mean for housing development?
In simple terms, we need to build more homes.
The government recognises that and has made changes to the planning system to try to make it easier to get planning consent for new homes. Yet despite those changes, the number of new homes built each year is still far below the number required.
That means that now has never been a better time to try to get planning permission on your site.
The Strategic Land Group are a specialist land promotion company who work with land owners to secure planning consent at our cost and risk. Our return is a share of the price when the site is sold. This makes sure our interests are the same from the start – to maximise the value of your land.
If you think we might be able to help with your site, get in touch today for a free, no obligation consultation.