Bank of Mum and Dad has its own risk warnings

Iona Bain

The well-known ‘Bank of Mum and Dad’ is bigger than expected, lending an estimated £300 million to help over 18,500 young Scots get on the housing ladder this year, according to a report this week.

Young house-buyers will need family support in 24per cent of all transactions, with an average contribution of almost £16,000, making ‘BoMaD’ one of the leading mortgage banks in the Scottish market, says Legal & General.

But parents and grandparents who pass down wealth, to help counter rising property values and expensive rents, need to be aware of their own tax and legal issues, and borrowers need to tell their other lenders.

Over three-quarters of BoMaD purchases will be supported by parents, with the remainder involving grandparents and other family members or friends. Half of contributions are gifts, one in eight are interest-free loans, one in 25 are loans with interest.

The average contribution amounted to 7.6per cent of the house purchase price, or over three-quarters of typical 10per cent deposit.

This represents over a third of the average BoMaD household net wealth in Scotland (excluding property assets). In London, this figure has already reached 51per cent of the average household net wealth

The spiralling cost of housing in London meanwhile means parents or grandparents elsewhere in the UK supporting children buying in the capital are devoting an average 64per cent of their own household wealth to the project.

Meanwhile homebuyers need to be aware of the pitfalls when they tap the family bank for cash.

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