Parents loan £5 billion to children each year

Parents looking to help their children purchase their first home will loan an estimated £5bn in 2016, according to research from Legal & General (L&G).

The “bank of mum and dad” and financial support from family and friends is expected to help fund £77 billion worth of housing purchases this year. 

L&G claims that 25% of all mortgage transactions – at an average amount of £17,500 – will be funded through inter-family loans.

The main ways buyers receive help from their family and friends are:

  • a gift (57%)
  • a loan with no interest (18%)
  • a loan with interest (5%).

L&G has also warned that the average loan size could wipe out more than half of family net wealth by 2035 – leading to a lack of disposable funds available to help young people onto the property ladder.

L&G chief executive Nigel Wilson said that the “bank of mum and dad” plays a vital role in helping young people take their first steps onto the housing ladder. 

However Wilson warned of important issues such as house prices being “out of sync with wages”. 

"We need to fix the housing market by revolutionising the supply side - if we build more houses, demand can be met at a sensible level and prices will stabilise relative to wages."

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