All hail BoMaD (the Bank of Mum and Dad) - the ninth biggest mortgage lender!
Posted on 9 May 2017 by
Coming to the end of your mortgage should be a time to celebrate; - now, if only you could get rid of those pesky kids! And that's where the 'Bank of Mum and Dad' or 'BoMaD', as it's becoming known, comes in.
The latest figures from Legal & General have shown that the aforementioned 'bank' would actually now equal the ninth largest mortgage lender, up from tenth position in 2016. L&G estimate that funds from mum and dad will be assisting 26 per cent of all property transactions this year, at a value of over £6.5billion and parents will provide deposits for their offspring on around 298,000 mortgages.
This year, it is estimated that 42 per cent of would-be homeowners will receive some form of financial assistance from either friends or family to aid their efforts to get on the property ladder and these figures are only likely to increase, as limited supply coupled with ongoing high levels of demand will maintain upwards pressure on prices.
This research may also explain why many borrowers with interest-only mortgages are reluctant to sell up when their term is approaching its end. In recent years, house price growth, especially in London and the South East, has outstripped most other traditional forms of investments, and as we're living longer and in many cases working longer, mum and dad want to keep hold of their major and probably most valuable asset, so they can help their children to get a leg up on to the housing ladder.
For many of these branches of BoMaD, their mortgages are on an interest-only basis, and they don't have a repayment vehicle in place to pay it off, which can leave them feeling very uncertain.
At the end of 2015, the Council Of Mortgage Lenders estimated that there were 1.7million full interest-only mortgages outstanding, with another further 500,000 on a part interest-only, part-repayment basis. However, more and more lenders are recognising that, as we are living longer and working longer, we are therefore likely to want to borrow for longer too - especially to help our little darlings fly the nest.
There are plenty of lenders who will lend up to a maximum age of 85, and a few who will even go up to 95. Although the thought of still having a mortgage at that age isn't likely to be too thrilling, it does at least give parents some options to not only help their children, but also to retain an asset that will still hopefully grow in value.
Much will depend on your financial position, when you want to retire, and how much the lender says you can afford. It's not an exact science and advice needs to be tailored to each individual situation - but it does give you some light at the end of the tunnel.
As brokers, we are ideally placed to help the BoMaD make the most of their home and assist their children into a place of their own.
For advice on how you can help your kids onto the property ladder read our guide here - or if you'd prefer to speak with a broker call us now on 0344 346 3672
Categories: First time buyers
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