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Are youngsters over-reliant on the "Bank of Mum and Dad?"

Are youngsters over-reliant on the "Bank of Mum and Dad?"

Published at 4:39pm 21st August 2019.

BDB Financial Promoted by
BDB Financial

In an ever-changing financial world, 27% of mortgages are now financed by the 'Bank of Mum and Dad', but as children become more reliant on their parents, who's to blame?

  • The 'Bank of Mum and Dad' (borrowing money from parents) financed almost 317,000 homes in 2017, on par with the UK's 9th largest mortgage lender.
  • Rises in the cost of housing mean 59% of younger homeowners got help from family or friends, whilst 25% of young adults still live at home.
  • Harrogate financial advisors BDB are offering advice to young adults to help them become financially independent, as well as helping parents work out to what extent they can help.

With an average house price of £230,000 in the UK (£347,664 in Harrogate!), it is becoming increasingly difficult for young adults to make their first moves onto the property ladder and it comes as no surprise that 25% of young adults still live at home.

The typical buyer would need 8 times the average annual income in the UK to be able to afford their first house, resulting in a reliance on family and friends, which can in some cases put a strain on their own financial stability.

The financial struggle for young people is also likely to continue as far as retirement, which commonly stretches as long as 30 years. Even if a young person puts 10% of their salary into a pension throughout their life, they are still likely to receive a massive lifestyle downgrade in retirement.

Moving house
The 'Bank of Mum and Dad' now finances 27% of all mortgage transactions as it becomes increasingly difficult to get on the housing ladder.

Although young adults may need to lean on family for financial support, BDB Managing Director Andrew Brook Dobson believes it's through no fault of their own:

"The economics and the numbers that we're talking about here are not brought about by anything that the young people have done or not done, so it's understandable that their confidence and motivation to obtain something that seems so far out of reach is small.

"We help our clients by advising their youngsters if they're under 25 free of charge, but it's helping the mums and dads who might be in a position to help their youngsters work out to what extent they can help them without impinging too much on their own lifestyle."

The Bank of Mum and Dad

Although more common in younger people making their first moves in the property market, the 'Bank of Mum and Dad' is not confined to that age group. 

43% of buyers aged 35-44 received help to buy from family or friends whilst 26% of those aged 45-54 did the same, showing the rise in house prices are affecting buyers of all ages, including those in the financial peak of their lives.

BDB are keen to educate and provide guidance for their customers to become financially responsible, competent and independent: 

"I think it's about understanding what is possible, and we've got some creative and interesting ways that we can help people that wont necessarily affect their lifestyle."

Andrew Brook-Dobson, Managing Director at BDB

Get in touch with BDB Financial online or give them a call on 01423 855680 for an informal chat about how they can help you and your family.

BDB Financial
BDB Financial offer free advice to under 25's and also to parents to determine the extent to which they can help their children financially.

Ben Groom from Stray Lifestyle spoke to Managing Director at BDB Financial Andrew Brook-Dobson about the reliance on the 'Bank of Mum and Dad':

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