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

Use of statutory demand to make company insolvent suspended until June

Blog, Legal Updates
08/04/2021
Cheraine Williams looks at more temporary Covid-driven measures that will protect businesses and tenants from possible legal action
Read more Read

New guidance issued for valuation of flats and investigating fire safety

Blog, Legal Updates
07/04/2021
Cheraine Williams looks a the current situation facing leaseholders looking to sell or re-finance their property; will new guidance provide clarity?
Read more Read

Government sets new energy targets for domestic and commercial buildings

Blog, Legal Updates
06/04/2021
UK law requires net zero greenhouse gas emissions by 2050; new rules and standards for heating and powering buildings will have a significant impact
Read more Read

Covid regs prevent landlords taking action to recover rent for more than 500 days

Blog, Legal Updates
01/04/2021
Just seven days’ rent arrears used to be enough for commercial landlords to take action; the latest adjustment pushes that out to 554 days
Read more Read
  • Brighton Office

    1 Jubilee Street

    Brighton

    East Sussex

    BN1 1GE

  • Gatwick Office

    Griffin House

    135 High Street

    Crawley

    West Sussex

    RH10 1DQ

  • Guildford Office

    Wonersh House

    The Guildway

    Old Portsmouth Road

    Guildford

    Surrey

    GU3 1LR

  • Horsham Office

    Ridgeland House

    15 Carfax

    Horsham

    West Sussex

    RH12 1DY

  • London Office

    6 New Street Square

    New Fetter Lane

    London

    EC4A 3BF

  • Get in touch