Millennials Over Reliant On Bank Of Mum And Dad
Older relatives are now lending out over £6 billion per year and have become the 11th largest lender in the UK. Whilst it is fantastic that many parents are in a position to offer their financial support, a raft of recent publications are suggesting that millennials are increasingly forced to rely on this help to achieve major milestones like owning property and even just saving money.
Recent research by Legal & General and the Centre for Economics and Business Research (Cebr), speculated that by the end of 2019 the money loaned by older relatives will have funded 259,400 property sales, a fifth of all transactions.
It also found that 62% of aspiring home owners under the age of 35 are reliant on parental support to finance their first home move.
A new survey, completed by Guarantor Loan Comparison, has found that the younger generations dependence on the Bank of Mum and Dad (BOMAD) is becoming embedded into millennial culture with 59% of 18-44 year olds receiving financial help from their older relatives at least once in the past year.
Furthermore, 45.9% of the same age bracket admitted that, despite making a concerted effort to save on their own, they needed additional money from their older relatives of friends to buy a house or afford their mortgage.
Almost a quarter (23%) of this age group are also dependent on BOMAD to help with their debts with 16% looking for saving support, guidance and help.
In the past year, 26% of respondents have needed financial help with their mortgage deposit, 12% are using parental contributions to pay their monthly mortgage repayments and almost a third (31%) being given at least £50 towards bills.
Despite this support becoming endemic amongst millennials, research from the Equity Release Council suggests they will not be able to offer their children the same financial help as they currently enjoy themselves.
The retirees of tomorrow are less likely to look upon their property as inheritance they will pass on after they die.
According to the Equity Release Council report, ‘Beyond bricks and mortar: the changing role of property in later life financial plans’– supported by Key, the UK’s leading independent equity release adviser, new pressures created as we live longer has forced the next generation of retirees to reassess the way they view their property.
Those aged between 45 and 64 view their property as a multi-purpose financial tool, with the express aim of supporting their own financial plans in retirement (55%) or using the equity in their home to help with unforeseen problems (49%).
In fact, only a quarter of respondents are prioritising the equity in their home as a way of helping younger family members.
The report has found that national property wealth has surpassed £4 trillion for the first time and is now the main source of wealth in most UK estates. As the population ages and people stop working, the reliance on property as their main income stream in old age starts to increase.
For every £1 of wealth accumulated by those aged between 65 and 74, 36p originates from property. This figure rises to 45p for those aged between 75 and 84, with 53p for those aged over 85-years-old.
The report highlights a clear shift in generational thinking when it comes to their perception of property. Where 64% of people over the age of 65 consider their property as a factor to their financial comfort in old age, this increases to 70% of 45-64-year-olds.
Even 68% of the younger generation, under 45, are aware of the importance their property will play in funding retirement planning strategies.
Additionally, 55% of 45-64 year-olds view their property as part of their financial plans for later life whilst this reduces to only 44% of people over 65. Over half (51%) of under 45s also perceive property as a vital cog in their planning for retirement.
Whilst the current set of millennials are able to enjoy the BOMAD lending stream, ageing implications will mean that equity in homes will need to be squirrelled away for the homeowner’s retirement in the near future.
With the Legal & General report calling for action to meet later life and intergenerational needs – including a Later Life Commission and Minister for the Elderly alongside industry and regulatory efforts, should more be done to help people in later life?