How the “Bank of Mum and Dad” is Reshaping UK Homeownership

In today’s property market, financial support from parents and grandparents has shifted from being a generous “bonus” to a near-necessity for many first-time buyers. With house prices remaining high and mortgage affordability becoming increasingly complex, the trend of “giving while living” is accelerating across the UK.

Rather than waiting for wealth to cascade down as a traditional inheritance, many homeowners aged 55 and over are choosing to deploy their property wealth now to help younger generations secure their first homes.

The Rising Importance of Family Support

The scale of the “Bank of Mum and Dad” (BOMAD) is significant. In 2023 alone, family gifts and loans reached approximately £9.4 billion, supporting around 164,000 first-time buyers—which accounted for 57% of all mortgaged first-time purchases.

Looking ahead, research from Savills forecasts that this level of support will continue, with family contributions expected to remain around £10.1 billion annually through 2025 and 2026. For many families, this support is the only realistic way to bridge the gap between wages and required deposits.

Source Link: Giving while living: How the Bank of Mum and Dad is reshaping deposits, affordability and advice

Why Property Wealth is Becoming a Strategic Tool

While some parents can provide help from cash savings, many are finding that their primary wealth is tied up in their home. This has led to a notable shift in how equity release is used:

1.) Gifting on the Rise: According to Canada life The share of equity release applications used specifically to support family rose from 13% in the first half of 2024 to 22% in the same period for 2025.

2.) Living Inheritance: Homeowners are increasingly using Lifetime Mortgages to provide a “living inheritance,” allowing them to see their loved ones enjoy the benefit of the gift during their own lifetime. Though it is important to remember that interest will accrue on the loan amount, which will increase the total debt over time and reduce the remaining equity in your home.

3.) Affordability Gains: By providing a larger deposit, parents can help their children access lower mortgage rates and more affordable monthly repayments. Homeowners should ensure that gifting these funds does not impact their own ability to meet future needs, such as the cost of long-term care.

Important Considerations and Risks

Equity release is a significant financial commitment and is not suitable for everyone. It is essential to understand both the benefits and the potential long-term impacts:

1.) Reduced Inheritance: Releasing equity will reduce the value of your estate and the amount you can leave as an inheritance to your beneficiaries.

2.) Impact on Benefits: The tax-free cash you receive could affect your entitlement to means-tested state benefits, such as Pension Credit or Council Tax Reduction.

3.) Interest Roll-up: With a traditional Lifetime Mortgage, if you choose not to make monthly repayments, interest will compound over time, which can cause the debt to grow rapidly.

4.) Early Repayment Charges: If you decide to pay off the mortgage early, significant charges may apply.

Finding the Right Balance

As the role of family wealth becomes more formal—often involving family loans or equity shares—the advice process becomes more complex. It is vital to seek specialist advice to ensure that any support is structured in a way that is fair for the whole family and does not compromise your own financial resilience in retirement.