Mortgage lending increases as ‘bank of mum and dad’ continues to underpin housing market

By 31/05/2018finance
The bank of mum and dad

Mortgage lending increased in April as the prospect of higher interest rates later this year prompted homeowners to lock into cheap deals.

The number of mortgage approvals in April increased by 11pc, compared with a year earlier. This reflects £20.4bn worth of lending, a 13pc rise on the same month last year.

A 30pc jump in remortgaging was largely responsible for the increase in overall lending, according to data from UK Finance, a trade association.

Eric Leenders, managing director of personal finance at UK Finance, said expectations for a rise in interest rates had driven many people to take out new mortgages while lending was still cheap.

Household savings, meanwhile, have grown by just 1.4pc over the past 12 months, with savers choosing instant access accounts over those with a notice period.

Spending on credit cards increased in April, but Mr Leenders said consumer confidence remained “relatively low”.

Meanwhile, new research from Legal & General suggests parents continue to be a major source of funding in helping their children buy homes.

This year, 27pc of buyers will get help from friends or family to purchase property, up from 25pc last year and accounting for 316,600 property transactions worth £81.7bn.

The number of property transactions funded by parents will increase by 3pc this year, with parental contributions highest in London, and lowest in Scotland. Nearly half of all buyers in London get help from their parents.

That makes the ‘bank of mum and dad’ the equivalent of a £5.7bn mortgage lender.

Parents are, however, providing smaller sums than they had previously contributed. The average contribution this year is expected to decline to £18,000, from £21,600 in 2017.

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