New Mortgage Lender: The Bank Of Mom And Dad

STUDY: 'The Bank of Mom and Dad' Ranks 7th Largest US Housing Lender of 2018


In a new report sponsored by Legal & General Group,family and friends play a major role in the U.S. housing market, supporting the purchase of $317 billion worth of property across America in 2018.

This accounts for 1.2 million homes, with an average sum of $39,000 lent or given.If it were an actual business, “The Bank of Mom and Dad” would be the No. 7 U.S. mortgage lender, reported Legal & General Group, a UK-based global financial services group and investor.

Nigel Wilson, Legal & General Group chief executive, noted that many young adults have found that homeownership is out of reach without financial assistance from their parents.

“More than half of prospective homeowners under the age of 35 now expect to have help from family or friends to buy a home; this is worrisome from several standpoints,” he said. “Over half of parents and others helping finance home purchases that we surveyed agreed that it is harder for younger generations to get onto the property ownership ladder than it was for them. While they cited the failure of income to keep up with the cost of living (64 percent) and high rents (49 percent) as reasons for this generational difficulty, the larger issue was property prices, which nearly three-quarters of BoMaD lenders say have risen to a point where they are unaffordable.”

Another factor assessed in the study is the fallout forBoMaD lenders,many of whomgo to significant lengths to help — by taking out a loan (15 percent), raiding their 401(k) savings (8 percent), downsizing their own home (6 percent), or coming out of retirement (3 percent).While the current situation puts undue strain on many who have worked hard to secure a comfortable retirement, it also has the effect of making many in the younger generations dependent on their parents and grandparents to buy a home, Legal & General noted.

The study also finds that many millennials have effectively given up on owning their own home — at least in the near term. Of those under 35 who don’t already own, 43 percent say they don’t expect this to change in the next five years — most often (40 percent) because it’s simply not feasible to save for a down payment in that time frame.

“BoMaD reflects, first and foremost, a housing market where significant problems remain in matching the supply and demand of different types of housing, most notably starter homes and affordable housing of all kinds,” Wilson said. “As the population changes and the Millennial generation strives to join the homeowning democracy, new thinking is due on meeting the needs and aspirations of Americans.”

Key findings of the 2019 BoMaD USA study include:

• 20 percent of homeowners across the U.S. said they received financial help from family and friends when they purchased their current home

• BoMaD spent $47 billion helping others purchase $317 billion worth of homes

• The Pacific region saw the greatest share (27 percent) of BoMaD assistance, and the Rocky Mountains region the lowest (11 percent)

• 43 percent of home buyers under 35 received BoMaD help in their home purchase

• 51 percent of those who graduated from college debt-free now own a home, whereas 39 percent do not

• 15 percent of BoMaD “lenders” have had to accept a lower standard of living to help their loved ones


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