The term BOMAD, Bank of Mum and Dad has been associated more and more in the past few years in the house lending industry, as they are now according to Legal and General one the biggest lenders to first time buyers the UK, lending their children around £6.5b this year alone to buy their first property1.
However according to a new report from Legal and General the BOMAD will also be funding £2.3 billion to their children who are in rental accommodation, which equates to 9% of renters on around 460,0002. So in total they will lend around £8.8 billion to their children to help support them in either renting or buying a home.
One of the main reasons parents are finding that they are having to help their children afford to live in their own home is because wages haven’t increased at the same pace as house inflation - in fact in a report by Trades and Congress published in the Telegraph3 they stated the real wages have dropped by 10.4pc since the financial crisis a drop which they say matched only by Greece.
Dan Batterton, fund manager for Build to Rent at LGIM Real Assets stated: ‘It is a real challenge for young people who are reliant on parental handouts just to make the rent. The intergenerational inequality that creates the demand for the Bank of Mum and Dad funding continues to widen and now it’s affecting renters too,’ he said.
The other reason why young people are finding it so hard to afford to buy or a rent a property is because of lack of supply - there needs to be even more new houses built so that their is enough accommodation for everyone - and it’s only at this point that we might start to see house inflation slow down. Self builds for example are some what of a rarity in the UK, there are only around 10% per year compared to other European countries which has around 50%.4
Help to children is at its highest in London and South East too, BOMAD in the South East pay out around £604 million compared to them lending £175 million in the North West and £369 million in Yorkshire and Humber.
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