The “Bank of Mum and Dad”

05 May 2017

Recent research by insurer Legal and General has revealed that the “Bank of Mum and Dad” is the UK’s tenth biggest mortgage lender. Soaring house prices, particularly in the south east, mean more and more first and second time buyers are relying on their parents either to provide a substantial deposit or assist with stamp duty costs.

In many cases parents are lending significant amounts of money. Equally, it is estimated that there is £400bn worth of inheritance, much of which will be put to helping new owners onto the housing ladder.

Making provision of a lifetime gift is a well established inheritance tax piece of advice. However for those parents who are helping with deposits - bridging the gap between mortgage-raising capacity - and purchase costs, beware.

Whilst we all do what we can for our children, assistance at the time of purchasing a property can go sour. This year we had a case where the parents had lent £70,000 into their daughter’s property. She subsequently met someone, got married and the parents wanted “their money back”. Unfortunately in the absence of any documentation or legal charge in their favour they simply had to watch as their soon to be ex-son-in-law benefitted from their investment.

Increasingly, parents who are investing in property for sons and daughters are becoming aware it is better to have some agreement in place than nothing. This might even run to a cohabitation agreement or in some cases pre-nuptial agreement.

Another area where the Bank of Mum and Dad is helping is the buy-to-let market. As many first time buyers are unable to afford even the simplest of starter flats, parents are stepping in and in some cases letting their properties to their children. In this situation it is important to have tenancy agreements in place to keep the transactions at arm’s length to ensure that any partners do not acquire any long term rights of occupation. 

The whole issue of housing and the disparity between north and south will become a national issue with questions around whether home ownership is becoming something for the wealthy only.

Further reading

Supporting employees through the next lockdown

Managing your employees through uncertainty and equipping them to thrive, remain engaged and feel part of a team environment, must be a HR priority for 2021.
Read more Read

Remote working and home security

Blog, News & PR
With a large proportion of the workforce now working from home, security arrangements for home workers need to be addressed - Robert Ganpatsingh explains
Read more Read

Tenants take note: dilapidations damages to be subject to VAT

Blog, Legal Updates
Property expert Cheraine Williams explains why dilapidations could be about to get more expensive
Read more Read

Covid business interruption insurance payments due to small and medium companies

Blog, Legal Updates
Partner Jonathan Compton looks at the Supreme Court’s decision on business interruption insurance
Read more Read
  • Brighton Office

    1 Jubilee Street


    East Sussex

    BN1 1GE

  • Gatwick Office

    Griffin House

    135 High Street


    West Sussex

    RH10 1DQ

  • Guildford Office

    Wonersh House

    The Guildway

    Old Portsmouth Road



    GU3 1LR

  • Horsham Office

    Ridgeland House

    15 Carfax


    West Sussex

    RH12 1DY

  • London Office

    6 New Street Square

    New Fetter Lane


    EC4A 3BF

  • Get in touch