Merryn's Blog

The “Bank of Mum and Dad” is just like any other bank – it wants a return on its money

Research suggests more and more parents are helping other people’s children get on to the property ladder. But they’re not doing it out of kindness, says Merryn Somerset Webb. They’re doing it for the money.

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I was beginning to think a real summer silly season would never come. But just in the nick of time a press release arrives from Legal & General.

A few months ago it released research suggesting that the Bank of Mum and Dad was handing over enough cash for house deposits to make it the equivalent of a top ten mortgage lender. This was mildly interesting (albeit hardly a secret).

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It has followed it up with research that really isn't interesting at all (or not in the way it wants it to be anyway). It reveals that, not satisfied with only helping their own children on to the property ladder, some 27% of people would consider helping "other people's children on to the property ladder".

Here's a quote from the guy in charge of this stuff: "The readiness to consider funding other people's children is clear proof that across the country people are looking for an innovative way to increase homeownership." Generous right? Well, not really.

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Mum and Dad have no intention of lending to other people's children on the same terms as they would their own children: they would need a "return on their investment" in the form of interest, rent, or shared ownership.

The essence of the story, then, is that in times of very low yields across all assets a lot of people would be interested in investing in higher-yielding asset such as property.

People aren't looking for an innovative way to increase homeownership or to help other people's children (who aren't children to them just people). They are looking for any way innovative or not to make more of a return on their cash.

Which presumably is why they are so interested in buy to let (helping people live in homes in exchange for rent) and peer to peer property lending (helping people live in homes in exchange for interest paid on loans see lendinvest.co.uk).

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