The Bank Of Mum And Dad Is Handing Out Huge Sums – And I Can’t Keep Up

Many banking tasks have become a doddle in the age of the internet. But should you want to speak to a bank manager – as in days of old – you won’t find it easy.

There is barely a branch to be found on the high street, and when you try to ring, you’ll probably be forced into an inane and infuriating conversation with an artificially unintelligent chatbot.

No wonder that many people prefer the bank of mum and dad to Barclays, Santander, Lloyds, and the rest. Not only can you actually see the people you’re dealing with, but you can even meet them over a homemade lasagne – and they might not charge you interest on your borrowings or worry too much about your credit rating.

Estimates this week from Savills, the estate agency, suggested that 52 per cent of first-time homebuyers last year received support from the familial purse, down slightly on the previous year, but still higher than in any other year for a decade.

A mixture of gifts and loans enabled young (and some not so young) individuals to realise their dream of getting a toehold on the housing ladder. Some would no doubt have been unable to pull together a deposit at all without parental help; for others, a bigger deposit meant lower interest rates on their mortgage repayments.

None of this may come as a great surprise. Rising house prices, general inflationary pressures and low economic growth have combined to make life ever more expensive over recent years. Members of the younger generations (notably millennials and Gen Z), who have accrued less wealth, are in a bind.

Yet the most shocking thing about this week’s data is not the proportion of first-time buyers receiving help, but rather the sums involved. In total, 173,500 individuals received a combined £9.6bn. The average amount dished out by generous parents, grandparents and others was just over £55,000. It’s hardly loose change.

I am sure there are lots of generous relations who scrimp and save in order to help. Indeed, there are plenty of tales of parents taking out second mortgages to help their kids; of grandparents dipping into meagre pensions; and even of some family loans being recalled when circumstances change. However, there are presumably many other cases in which handing over a gift of £55k is not a particularly exceptional transaction for the person bestowing it.

For the luckiest of the baby boomer generation, rising house prices and gold-plated pensions – allied of course to hard work, before anyone thinks I’m being mean – have created huge wealth, and now it can be shared.

The ability of older generations to subsidise their younger relatives clearly highlights the generational inequality that exists in the UK today. But it’s not an even inequality. There are plenty of older people who do not have vast wealth, who are not sitting on property empires or final salary pension income. Their branches of the bank of mum and dad are very much not open for business – however much they would like to help their kids or grandchildren.

For their younger relatives, there is no sizeable gift on the table, no interest-free loan, and therefore perhaps little chance of getting their first taste of home ownership. Instead, they are probably stuck with rising rents and little chance of saving.

Generational inequality perpetuates broader injustice because that 55 grand’s worth of family help – unearned by those in receipt of it – enables better financial outcomes, even better life outcomes overall. And things are getting worse: in the last decade, the wealth gap between the richest 10 per cent and the poorest 10 per cent of the UK grew by half in absolute terms.

And yet what is the answer to this challenge? We all want to help our kids, however we can (even if there is an argument in favour of encouraging financial independence). Reform of inheritance tax may level the playing field very slightly, but when the field is sited on the side of a mountain, there is only so much levelling to be done.

My own kids are not in line for a fortune. But I took advantage of the Government’s child trust fund scheme, and its Junior ISA successor, and have added a few quid every month since my children were tiny.

It will give them much less than some, but a lot more than many others. And in a world of unfairness, that’s about the best that can be said about it.