Tel: 01283 701569

Experienced Independent Financial Advisers

Bank of Mum and Dad

14 Dec 2020

Make sure you can afford it and understand any tax implications

Parents have always supported their children in lots of different ways. These days, growing numbers of parents see their adult children struggling to build up enough in savings to put down the deposit on a house or to afford to move up from a first home to something larger – but does this mean parents should help financially?

New research shows that the Bank of Mum and Dad will be a driving force behind the recovery of Britain’s housing market as buyers struggle with the economic impact of COVID-19[1]. Nearly one in four housing transactions (23%) will have been backed by the Bank of Mum and Dad in 2020, with a quarter (24%) of borrowers now more reliant on financial support from family and friends.

Total property transactions
Mirroring the impact of the lockdown on the UK housing market, it is forecast that the Bank of Mum and Dad will lend £3.5bn to loved ones this year – which is almost half the £6.3bn that parents, grandparents, other family and friends lent in 2019. As a result it will lead to the funding of 85,000 fewer home purchases. 

The figures reflect the effective closure of the housing market under the COVID-19 induced lockdown and a wider collapse in purchases reported by HM Revenue & Customs, with total property transactions similarly falling by nearly half in Q2 2020. Despite this, the Bank of Mum and Dad will still be involved in 175,000 housing transactions, with an estimated transaction value of £50.3bn, this year.

Make sure you can afford it
The Bank of Mum and Dad is set to be a key element in the driving force behind the housing sector’s recovery, as thousands of buyers press ahead with their plans to buy. Last year, 19% of all home purchases were funded wholly or partly by the Bank of Mum and Dad. In 2020 that figure is set to rise to nearly a quarter (23%). Of those who’ve bought recently and received support from family and friends, 65% said it would have been ‘unlikely’ without help from the Bank of Mum and Dad. 

If you do decide to act as the Bank of Mum and Dad, it’s important to make sure you can afford it. If you’re using your pension and savings to help out, consider what impact that will have on your own retirement. It’s also important to make sure it’s clear whether the money is a gift or a loan, as this will have different tax implications. If your child is moving in with a partner, you may want a say in how the rights to the property will be held should the relationship break down at some point.

Facing the economic implications
One in five (19%) expect they would have had to delay their purchase by more than five years without Bank of Mum and Dad support, and a further 14% said they never would have been able to buy without the help of family or friends. 

The figures come as buyers face the economic implications of the pandemic and a restriction in the choice of high loan-to-value (LTV) mortgages on which many buyers (especially first-time buyers) rely. Data from Moneyfacts has shown a fall in the number of 90% LTV mortgages on the market which allow people to buy with just a 10% deposit.

Property market activity
Despite the Stamp Duty holiday for purchases under £500,000, just 8% of would-be purchasers say they are less reliant on family or friends for financial support as a result of the policy measures introduced to mitigate the effects of the coronavirus crisis. Only 12% have brought forward their plans to buy since the start of the pandemic. 

If ‘Build, Build, Build’ is how we will recover from COVID-19, then the Bank of Mum and Dad will be centre stage once more.  Generous parents, grandparents, family members and friends are gifting thousands towards deposits, with the Bank of Mum and Dad outpacing even the Stamp Duty cuts designed to stimulate property market activity.

Uncertain economic future
For years buyers have been faced with a limited supply of affordable homes. A challenge which is now being compounded by COVID-19. Not only are buyers facing an uncertain economic future, but changes by lenders in the wake of the pandemic have restricted the low-deposit mortgage options on which many young people rely to make their first step.

While the Bank of Mum and Dad is helping those lucky enough to have their backing, a generation of hopeful buyers without the support of the Bank of Mum and Dad could find themselves locked out of the housing market.

Source data:


Footnote: Our belief is that all finacial advice should be tailored to your particular needs and situation. The content of the articles featured in here are for your general information and use only; they are not intended to address your particular requirements or constitute a full and authoritative statement of the law. They should not be relied upon in their entirety and shall not be deemed to be, or constitute advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. Please get in touch to meet with us for a full consultation.

Get in touch for more details

Please fill the form below to contact us

    Your Name (required)

    Company Name

    Your Email (required)

    Areas of concern

    Individual servicesCorporate servicesMiscellaneous


    Your Message

    We take your Privacy Seriously. Personal information submitted to us with this form will be treated in accordance with the Data Protection Act 2018 and General Data Protection Regulations ‘GDPR’. By submitting this enquiry form you expressly consent to be contacted without prior notice or arrangement by using the contact details you have provided on the form. For further information on how we treat your personal information, please view our Privacy Policy

    I have read and agree to the privacy policy. Please retain my details to contact me.Please do not add me to the mailing list.