More than a quarter of parents in the UK would be willing to lend money to other people’s children to help them buy a home, potentially opening up a new avenue for peer-to-peer lending.
A recent survey by Legal & General found that 27% of parents and grandparents would consider funding other people’s children onto the property ladder in exchange for a return on their investment.
At present, there are no schemes in the mortgage market for this type of lending. According to BBC News, the closest thing is peer-to-peer lenders which allow people to invest small sums of money in the buy-to-let market.
But with interest rates at record lows, the idea could take off.
In terms of investment returns, Legal & General found that 39% of potential investors expected to receive a financial reward in the form of a loan repayment with interest. Another 21% would expect monthly rent from the occupier, while 17% would want a share in the ownership of the property.
Stephen Smith, director of Legal & General Housing Partnerships, commented: “An extended period of low interest rates and new restrictions on the buy to let market have left older generations searching for a good return on their investment. Initiatives for funding other people’s children offer a new way to invest into the property market, as they help to pair up older generations looking for a better investment return with prospective homeowners who need financial help.
“Clearly the demand for investment opportunities is there — now we need to see if the industry responds with product innovation to enable ‘The Bank of Mum and Dad’ to spread beyond funding the immediate family unit.”