In the ever-turbulent waters of the UK property market, there’s a new trend on the rise. It seems many of us are leaning on our families to secure that crucial first step onto the property ladder or to move up it. But what exactly is happening, why is it happening, and what does it mean for you?
The Growing Phenomenon: ‘The Bank of Family’
The phrase “Bank of Family” isn’t talking about a new High Street bank, but rather the increasing trend of family members stepping in to financially support relatives in buying a home. According to research by Legal & General and the Centre for Economics and Business Research (Cebr), if this “bank” were a formal entity, it would rank as the ninth largest lender in the UK!
Regional Differences in Support
Interestingly, family financial support doesn’t match up neatly with the varying house prices across the country. For instance, the East of England, despite not having the highest house prices, sees the most significant average financial help at £32,100. In contrast, residents in the West Midlands receive the least support, averaging £19,800.
City vs Countryside: Who’s Getting More?
It’s not just a north-south or east-west divide; there’s a clear difference between urban and rural areas. In 2023, the Bank of Family will help finance a whopping 216,500 urban homes. But in rural areas, that number drops dramatically, supporting just 100,500 homes.
However, it’s essential to note that urban homebuyers not only lean on family support more frequently but also tend to borrow larger sums than their countryside counterparts.
The Impact on the Broader Property Market
So, why this sudden reliance on family support? The harsh reality is that home affordability is taking a hit. With the Bank of England’s base rate jumping from a mere 0.1% in December 2021 to a staggering 5.25% by August 2023, mortgage costs have soared. On average, semi-detached house repayments surged by 61% from 2022 to 2023 across the UK.
This trend is glaringly apparent in London, where the average house price is almost double the UK average. A significant 67% of homebuyers in the capital have turned to the Bank of Family for financial aid. The North West follows at a distant second, with only 36% seeking such assistance.
Advice Sought: Or Not?
One of the more concerning findings from the research is that many of those receiving financial aid from family are not seeking professional advice. Only 39% of recipients consult a mortgage broker or professional adviser during their Bank of Family transaction. Even more concerning, 28% didn’t seek any advice at all.
Interestingly, women are more likely than men to consult professionals. However, a substantial number of men (42%) prefer to get advice from friends rather than professionals, compared to just 29% of women.
Kevin Roberts, from Legal & General Mortgage Services, highlights this as a potential pitfall. “In such a challenging economic climate,” he warns, “buyers must not overlook the insights that an adviser can bring to even the most complex of property transactions.”
Wrapping Up
The Bank of Family’s rise shines a light on the growing affordability crisis in the UK property market. While family support can be a lifeline for many, it’s crucial for recipients to seek professional advice to navigate the potential complexities and pitfalls. As the housing market continues to evolve, so too will the ways in which we finance our homes.