In a recent study, it has been revealed that an unprecedented number of individuals are turning to their family members to secure the means to purchase a home.
This emerging trend, referred to as the "Bank of Family," is projected to facilitate around 318,400 property transactions this year, according to findings by Legal & General (L&G).
L&G's research underscores that financial support from family members is proving pivotal for a substantial proportion of homebuyers. Among those under the age of 55, approximately 47% of all home acquisitions are being made possible with contributions from parents, grandparents, and other relatives. However, L&G cautions that individuals without such familial aid may find themselves disadvantaged in accessing the housing market.
The financial services group has meticulously tracked the pattern of family assistance for home purchases over the past seven years. In 2023, the reliance on relatives' support for securing a down payment is at an all-time high. This assistance was originally coined as the "Bank of Mum and Dad," but L&G has updated the term to the "Bank of Family" to better encompass the contributions from a broader range of relatives, including grandparents, and to account for the diverse structures of modern families.
L&G's analysis indicates that the average amount extended by families to their loved ones is set to reach £25,600 this year, with the overall lending figure anticipated to reach £8.1 billion. For context, the initial study conducted in 2016 reported a total lending value of £5.3 billion.
Additional research from Hamptons estate agents and Skipton Building Society points to a growing role of siblings as contributors to funding. Of the family members involved in financing deposits for first-time homebuyers, siblings now constitute an unprecedented 11% share, more than doubling the 5% recorded five years ago. Their average donation stands at £10,250.
Legal & General notes that the escalation in house prices has significantly outpaced wage growth. Coupled with the challenges posed by a cost of living crisis and rising interest rates, prospective buyers are finding it increasingly difficult to enter the property market without assistance from their families.
Bernie Hickman, Chief Executive of Legal & General Retail, emphasized that while the primary contributors are parents, extended family members and even family friends are also offering substantial assistance. Hickman highlighted that nearly half of those purchasing homes before the age of 55 are benefiting from familial support. However, he noted that the flip side of this trend is that individuals lacking family support face heightened difficulty in accessing the property ladder.
Hickman also highlighted that beyond financial aid, families are providing non-monetary support, such as allowing adult children to reside at home rent-free while they save for a deposit. L&G's survey found that one out of every five respondents believed that without family assistance, they would need to postpone their home purchase by over five years. Additionally, one in ten respondents felt that they would be unable to realize their dream of homeownership.
Mr. Hickman commented on this situation, stating, "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 research delved into regional variations in the extent of family assistance. In London, more than two-thirds of homebuyers received help from their families, with the average contribution amounting to £30,200. The East of England recorded the highest level of assistance, with an average contribution of £32,100. In contrast, the lowest average contribution from families was observed in the East Midlands (£20,000) and the West Midlands (£19,800).
Recent housing surveys have signaled a decline in house prices in recent months. According to Halifax, the cost of a typical home in the UK is now 6.7 times the average annual earnings of a full-time worker, down from a record of 7.3 times a year ago. Despite this adjustment, the affordability of a typical home remains below pre-pandemic levels, exacerbated by rising interest rates causing mortgages to consume a larger share of incomes.