When I graduated and moved back to London aged 22, I felt panicked. It was 2010, and house prices were beginning their post-financial crisis surge. Every time I checked Zoopla or Rightmove, I watched the cost of housing enter silly-money territory while rents began rising too.
At the time, I earned around £23,000. There was no way I could pay rent and save a deposit. So I asked my parents if they could help me by loaning me a deposit, because that’s what was happening all around me. Friends’ parents with cash to spare gave it to their children as a deposit and, in a few cases, some even remortgaged or took money out of their pensions to help their children. But mine couldn’t afford to.
Decades later, the Bank of Mum and Dad has become a mainstay of Britain’s economy. Financial gifts from parents and grandparents are the way that almost half of all young adults manage to buy a home.
In 2024 alone, financial services provider Legal and General estimates that the Bank of Mum and Dad handed out a total of £9.2bn worth of help.
But, with rising living costs, higher mortgage rates and older people’s fears about having to pay for health treatment due to long NHS waiting lists, some parents and grandparents are now asking for their money back.
Sarah (not her real name) is a 34-year-old from the south of England. She managed to buy her first home with her fiancé because his grandmother lent them £25,000.
“We never discussed her needing it back,” Sarah says. “But then suddenly my partner told me she’d asked for it back because she was worried about needing to pay for care. We had to scramble around to remortgage and find the money for her.”
This led to Sarah and her partner ending up on a higher mortgage rate (3.5 per cent instead of closer to one per cent) and having to pay around £1,000 to change their mortgage deal early.
“It was hard not to be a bit angry at her,” Sarah admits. “But I guess she helped us get on the housing ladder, and luckily the house had gone up a bit [in value], so there was money to play with.”
‘I don’t think I’d have had kids without help for a deposit’
Mia (not her real name), from Sussex told me that her grandparents’ decision to help her in the 2010s has caused some tension with her brother because he hasn’t been given the same help.
Now 36, she lives in a house with her two children and partner. But, back in 2010, she was 22 and just about to start her first ever job in London.
“I couldn’t afford to rent and save for a deposit,” she explains, “so my mum suggested that my grandparents lend me a deposit. The agreement was that I’d repay it in five years and keep any profit on the flat when I sold it.”
Mia’s grandparents loaned her £120,000. When she sold the flat in 2015, it had gone up in value, so she repaid the loan and had £45,000 profit from the sale, which she put towards the home she now lives in.
“I don’t think I’d have kids if they hadn’t done that for me,” she reflects. “We would have been too focused on having to save for a house.”
Throughout the 2010s, house price inflation outpaced wage growth. This has meant that more and more young adults rely on family members for financial help to buy a home, but it can cause financial instability for elder relatives and put a strain on family relationships.
The problem now is that, unlike Sarah or Mia, homeowners today are not seeing prices rise as rapidly as they did in the 2010s. This can make giving money back to family tricky.
Jenny, 35, (again, not her real name) works in sustainability and now lives in Bedfordshire in a home she owns. But in 2020, she was living in a rented flat with her now ex-boyfriend.
“We broke up and I couldn’t afford to rent anywhere on my own on my salary of £36,000,” she says. “My dad, bless him, felt so bad that I was 30 and moving into a houseshare with loads of 22-year-olds that he took money out of his pension to help me buy.”
Jenny’s Dad took £20,000 out of his pension, which he gifted to her to help her to buy a one-bedroom flat.
“He didn’t want me to worry about having a boyfriend or needing a bloke to have my own place,” she says. “But I feel bad about it because that’s all the money dad has in the world, that pension – he doesn’t own a home himself. He recently moved into a social studio flat with shared washing-machine facilities – it’s council-assisted living. It’s all he could get from the council.”
Jenny says that she left crying when she saw where her Dad was living.
“He’s in his seventies, worked all his life, lent me this money, and now he lives in this one room. I felt really bad, but I don’t think he minds because he really wanted to help me keep a roof over my head.”
In recent years, Britain’s economy has become more volatile than at any point since 2008. Parents and grandparents who have handed out enormous sums of money to their children and grandchildren are, quite reasonably, rethinking their finances. Many of them may find that they are too wealthy to qualify for fully funded adult social care in old age, but not quite wealthy enough to get away without having to worry about how to pay for care at all.
This, coupled with higher prices thanks to inflation, stagnant house prices and falling savings rates, means that the Bank of Mum and Dad may not be quite as solvent as it once was.
However, because buying a home remains more expensive than it was at almost any other point in history for young adults, the reliance on gifts from family isn’t going anywhere. The great irony of all of this is that those younger people who borrowed money from family to buy unaffordable homes probably contributed to the house price inflation that means so many need help today.
‘I’ve paying £100 a month back – it’s all I can afford’
Jenny is determined to repay her Dad because she knows he needs the money. “I’ve been paying him £100 a month back since I borrowed that money because it’s all I can afford after mortgage and bills.”
However, her home has not risen dramatically in value since she bought it. “If I had the money to give him back now, I’d give him everything and more to say thank you,” she says.
As the Bank of Mum and Dad’s lenders reach old age, we might be about to find out what happens when their progeny can’t suddenly withdraw huge sums of money from their homes if it’s needed in an emergency.
square VICKY SPRATT
In my rush to hit life milestones, I made big mistakes
Read MoreHouse prices are not rising as quickly as they once were, which means people aren’t seeing their equity increase rapidly. Higher mortgage rates also mean that owning a home is more expensive than it was pre-pandemic if you have a loan.
I am glad that I didn’t borrow money from ageing relatives because my mortgage has gone up by almost £600 a month since 2019, while my flat has actually fallen slightly in value and, honestly, I don’t know how I’d repay it.
Labour ministers continue to talk about building 1.5 million new homes, and the Prime Minister mentions his ambition to increase homeownership at every opportunity. However, they should pay attention to the potential consequences of so many young adults borrowing money from their parents – it increasingly looks like a stopgap, and not everyone has a repayment plan.
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