Parents are now giving their children so much money that the so-called "Bank of Mum and Dad" is equivalent in size to a top-10 mortgage lender, according to research by Legal & General and the Centre for Economics and Business Research (Cebr).
Over £5bn ($7.35bn) will be handed by parents to their children for the purpose of buying property, such as mortgage deposits, in 2016 alone. The 300,000 mortgages secured off the back of support from parents will lead to £77bn worth of home purchases in the year. The most recent data from the Council of Mortgage Lenders (CML), which is for 2014, shows Clydesdale Bank as the 10th largest lender after loaning £5bn in the year. In ninth place was Virgin Money at £5.8bn.
It means money from parents will be involved in a quarter of all property transactions in the UK, the research claimed. The average financial contribution of parents is £17,500, but not all of these are loans as 57% are "gifts". Moreover, 18% are interest-free loans. Only 5% come with interest attached.
The rising cost of housing and low incomes make it hard for aspiring homeowners to save a deposit to buy their first property. Rents and house prices have spiralled in some parts of the country, particularly London, because of a property shortage. Despite government support schemes such as Help to Buy, and record-low interest rates, many are still struggling to secure a premises.
"The Bank of Mum and Dad plays an increasingly vital role in helping young people take their early steps on the housing ladder," said Nigel Wilson, chief executive of Legal & General. "But the generosity being displayed by UK families doesn't make up for intergenerational unfairness – younger people today don't have the advantages that baby boomers had, including cheap housing that delivered windfall gains.
"People will always want to help family members – it is a natural thing to do. Relying so heavily on the Bank of Mum and Dad, however, risks increasing inequality as many young people today are not lucky enough to be able to access parental support when buying a home, or can't afford to buy even with parental help."
Estimates vary about the level of housing demand, but most fall between 200,000 and 300,000 of new units needed a year in England alone. Government statistics show there were just 142,890 housing completions in England in 2015, though this is 21% higher than the year before.
According to figures from the Office for National Statistics (ONS), the average UK house price shot up by 50% between 2005 and 2015. In London, the average house price leapt 90% across the same decade. To contrast with pay, average weekly earnings between 2005 and 2015 rose just 23% in England and 19% in London.
Over a similar time period has been the emergence of "generation rent", young people stuck in private renting. The government's English Housing Survey shows that in 2004-05, just 24% of those aged 25 to 34 lived in the private rented sector. By 2014-15 this was 46%. At the same time, the proportion of 25 to 34-year-olds buying with a mortgage decreased from 54% to 34%.