Bank of Mum and Dad

The so-called 'Bank of Mum and Dad' has long been a phrase familiar to property lawyers and those who want to buy a house or flat. It describes the situation where prospective homebuyers who are finding it difficult to save a deposit accept gifts from their parents to help them get on the property ladder.

However, new research from Legal & General and the Centre for Economics and Business Research (Cebr) has revealed that 'financial support from family members, the 'Bank of Family', is expected to help fund 318,400 housing transactions in 2023'.

'In previous years Legal & General has logged this lending as the 'Bank of Mum and Dad', but this year the business will be referring to the research as the 'Bank of Family', as the term more accurately reflects the contribution of other members and the breadth and diversity of modern family structures.'

The research reveals that: 'The value of financial support families will give, and the number of home purchases that this will help fund, have both ballooned over the last seven years. Following an inevitable dip in lending during the Covid-19 lockdowns, the value of financial support offered by families resumed its dramatic growth.

'The average amount of 'Bank of Family' money given by family is expected to hit £25,600 this year, while total lending is expected to climb to £8.1 billion in 2023, up 50% on 2020. The total value of properties bought with 'Bank of Family' assistance is predicted to reach £124.6 billion this year. Family contributions are set to climb to a staggering £10 billion by 2025.'

Whilst this is undoubtedly good news for the housing market, homebuyers should ensure that they instruct their conveyancing lawyer early in the transaction to avoid delays. This is because law firms face considerable responsibilities under the anti-money-laundering regime to check where the funds that a client is putting towards a property purchase have come from. This is often referred to as the 'source of funds and source of wealth checks'.

If money that is being put towards a property purchase is coming from a number of different sources including parents and family members, this will increase the due diligence requirements on the conveyancing lawyer. Therefore, all homebuyers in this position are well advised to contact their conveyancer to establish what information is required - this will help to smooth the conveyancing process and should ensure that the buyer can move into their new home more quickly.

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