Is yours a Bomad household – or is it likely to be someday soon?

The so-called Bank of Mum and Dad is giving millions of pounds a year to their children for things like a deposit on their first house

YOU'LL read elsewhere on today's personal finance pages about the Eat Out to Help Out scheme, a brilliant initiative which offers each of us up to a £10 discount to get out and help our local restaurant or pub get a few pounds in the till again.

But restaurants haven't been the only institutions hard hit by lockdown, because also labouring under the pressures of the last few months is the oldest financial institution of them - Bomad, or the ‘Bank of Mum and Dad.'

With many salaries trimmed down, plus the spectre of financial insecurity that emerged over Brexit followed by the virus pandemic, the proportion of people borrowing from mum and dad, or from friends, fell from nearly a third (31 per cent) in March 2019 to around a fifth (22 per cent) in March this year, according to new research from the Lloyds Banking Group.

Then, as lockdown proper kicked in at the end of March, borrowing levels dropped even further, to just 13 per cent.

Things were just as bad on the lending side: numbers of those lending to loved ones were halved from 40 per cent in 2019 to just 19 per cent in June 2020.

It's not rocket science: many of us are a bit more skint this year.

When we think of loans from the Bank of Mum and Dad, we particularly think of young adults trying to cobble together a deposit on their first house.

Bomad is a major player in this process, in fact The London School of Economics (LSE) says that all the mums and dads make up the sixth-biggest mortgage lender in the country, handing out a massive £6bn in loans or gifts last year.

However, banks are demanding higher deposits these days, leaving first-time buyers struggling even more than in the credit crunch of 2007, and Savills the estate agent tell us that their research shows that two-fifths of mortgaged first time buyers had help from Bomad in 2019.

Mind you, it's not just that there's less shekels about - there's less houses on offer, too. The falling number of loans reflects a sharp fall in housing market activity, another stark consequence of lockdown.

On the up side, parents still remain eager to help their children out. On the down side, they tell us they don't know how to transfer wealth to their young adults in a tax-efficient manner.

A new nationwide survey from the Openwork network of financial advisers shows that a third (32 per cent) of parents are nervous how they run their branch of Bomad, and say they would value good quality financial advice on how to avoid its many traps and pitfalls.

Nearly two-thirds (62 per cent) said they need advice on making gifts and loans to their children, while 71 per cent said government should set up tax incentives to help their children use their Bomad loan to get a foot on the property ladder.

Bomad loans can be a hefty expense, on average £24,100, according to the LSE. Giving or even lending that kind of money to your children creates a secondary problem: does it affect your own forward planning? Will it leave you short of cash for a decent lifestyle in retirement?

It's a difficult choice for many parents. You can only spend the same pound once, so do we use it to support our children, at the risk of investing too little in our own future?

This is where sitting down with a financial adviser can help. It could be the case that we could devise a sensible, tax-efficient solution to support your children, but still have enough income for yourselves as well.

Is yours a Bomad household – or is it likely to be someday soon?

:: Michael Kennedy and Shaun Doherty are independent financial advisers and pensions specialists, and can be contacted on 028 71886005 . Further information on Facebookat “Kennedy Independent Financial Advice Ltd” or at

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