Bank of Mum and Dad could be reducing social mobility for newer generations

Photo of a couple looking at an estate agent
By Alex Burden, Student Blog

11 May 2017

Inherited or gifted deposits from family now account for a third of all first-time buyers' capital - but it's reducing wider social mobility on the open market. 

Findings by the Social Mobility Commission have revealed that the 'bank of mum and dad' is holding back a generation of would-be homeowners.

The open market is increasingly competitive with a limited supply of housing, and buyers who have the support of their parents' finances are edging out other would-be buyers with smaller reserves.   

"Aspiring first time buyers for whom family help is unavailable will most likely remain disadvantaged, even more so if their parents fall into the least educationally qualified category," said the Social Mobility Commission.

"Going forward, the gap will almost certainly be maintained between those in the UK who can acquire that most significant of financial assets, the family home, and those who cannot."

The Commission predicts that 40% of all deposits will be funded by wealthy parents in 2019. Currently, just 31% of 25 to 29 years olds own their home; in 1990, 63% owned their home. 

Alan Milburn, the Commission's chair said: "Owning a home is becoming a distant dream for millions of young people on low incomes who do not have the luxury of relying on the bank of mum and dad to give them a foot up on the housing ladder. The way the housing market is operating is exacerbating inequality and impeding social mobility.”

Lack of access to the housing market and the correct level of funds to substantially offer over asking prices or market value means that 'generation rent' is continuously growing. In fact, the private rental sector has doubled since 2004.

Symptoms of the housing market?

The English Housing Survey found that under 63% of homes were occupied by owners - a continuous decrease since 1985. 

Legal & General's latest research indicates that the Bank of Mum and Dad (BoMaD) will lend out $6.5bn this year and cover more than 25% of all property transactions. Indeed, this now makes BoMaD the 9th biggest UK mortgage lender, but what does this mean for the wider housing market?

“The Bank of Mum and Dad continues to grow in importance in helping young people take their early steps onto the housing ladder,” said Nigel Wilson, Legal & General's CEO.

“The intergenerational inequality that creates the demand for BoMaD funding continues to widen – younger people today don’t have the same opportunities that the baby-boomers had, including affordable housing, defined benefit pensions and free university education.

“Parents want to help their kids get on in life, and the Bank of Mum and Dad is a testament to their generosity, but it is also a symptom of our broken housing market.”


If you're thinking about buying your first home, where is the cash likely to come from? Savings, scrimping, or a gifted deposit? Tell us in the comments below, or email studentblog@icas.com.

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