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‘Bank of mum and dad’ divides UK’s generation rent

Parental wealth has become far more important in determining whether young people in the UK own a home or not since the financial crisis, according to a report from a think-tank that demonstrates how the UK’s property market is entrenching inequality.

Analysis by the Resolution Foundation, published on Tuesday, found that while young people today are all much less likely to own property than previous generations did at the same age, the gap between those who come from wealth and those who do not has widened.

Britain’s young people have been dubbed “generation rent” as they are far less likely to be able to purchase their own homes than previous generations were at the same age. They are much more likely to be renting from a private landlord.

Their difficulty in accumulating the housing and pension wealth of previous generations has led policymakers in the UK to talk of a “housing crisis” and helped fuel support for the opposition Labour party led by Jeremy Corbyn.

The Resolution Foundation analysis, which links two long-running data sets, is one of the first published attempts to measure the importance of the so-called “ bank of mum and dad”, which refers to parents giving or lending the money for a mortgage deposit to their children.

After controlling for different levels of earnings, those with parental property wealth were 80 per cent more likely to become homeowners than those whose parents did not own their own home in any given year between 2013 and 2017. Between 2003 and 2007 the difference was just 20 per cent.

Stephen Clarke, senior economic analyst at the Resolution Foundation, said: “High house prices and sluggish wage growth have meant that being able to buy a home of their own is almost impossible for many young people without access to the bank of mum and dad.”

“In fact, our housing crisis is so big that what your parents own is becoming as important as how much you earn when it comes to owning your own home,” he said.

Since the financial crisis in 2008, banks have tightened the criteria they use to assess whether to lend to someone, meaning those who can tap their parents wealth to put down a deposit have found it much easier to secure a mortgage.

The Resolution Foundation report went on to say that the government’s Help-to-Buy equity loan scheme “could be better targeted” and should consider someone’s family wealth and parental income, as well as their own resources.

The report added, “fundamentally schemes like HTB are about helping those who are close to being able to afford their own home. In order to improve home ownership prospects for the majority of younger people, more concerted action . . . is needed.”


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