Bank of Mum and Dad is now issuing crisis loans across UK

It has long been understood that the totals gifted or loaned for property purchases are high enough that if the “Bank of Mum and Dad” was a mortgage lender, it would be in the UK’s top ten.

It cannot be denied that these loans contribute to the pricing-out of people without wealthy parents.

Anyone who seriously imagined this practice wasn’t fuelling inequality was deluded – perhaps hoping that their own contributions somehow didn’t count. But faced with this week’s headlines, how are those parents supposed to feel? Guilty about contributing to inequality? I doubt it. They’d feel much more guilty about leaving their own offspring to sink or swim in the private rental market at a time like this.

READ MORE: Scottish students needing financial support skyrocketing

Most parents of those who are now in their twenties and early thirties will not have expected to be in this position. It was not unreasonable for them to assume that a decent standard of independent living in the UK would be within the reach of their children, and that with the right guidance and encouragement they would be standing on their own two feet by now – indeed, thriving and starting their own families.

That future didn’t necessarily need to involve home ownership, just stability and security.

A modest place to live, perhaps a car, a decent holiday once a year ... these aren’t big dreams.

But for so many, day-to-day life has turned into a nightmare. Every week another headline, more statistics.

This week, the Scottish SPCA reporting that last year 4000 people got in touch about abandoning their pets – a three-fold increase on the 2021 number – mostly on cost grounds. The gut-wrenching stories behind that figure, the guilt and the shame, don’t bear thinking about.

What power do most parents and grandparents of those in such dire straits have to help beyond a direct subsidy to loved ones who are struggling to make ends meet due to factors beyond their control?

It’s important to note that the research by the IFS, based on data from the UK-wide Wealth and Assets Survey, relates only to gifts and loans worth £500 or more.

Many more parents will be helping their adult children with a few hundred here and there, or a regular sum for rent to tide them over until things (fingers crossed) settle down. Their limited resources are being swiftly depleted just so their families can stand still.

Those who have saved for their retirement may be issuing crisis loans rather than providing handouts, to people who would never previously have dreamed of approaching the Bank of Mum and Dad but are now swallowing their pride.

The current acute crisis won’t last forever, but what will the housing market look like when it ends, and what are the long-term plans of the UK Government and Scottish Government to ensure that everyone has a safe, secure and affordable home to live in? Those parents whose gifts go towards property deposits have a particular moral obligation to be asking.

Those who obsess over the value of their homes – or who are landlords themselves – need to consider whether their economic gains (actual or theoretical) can only come at the expense of those less fortunate.

The IFS report points out that while the direct impact of transfers from parents to young adult offspring may be modest, how the money is spent affects the long-term impact.

Those whose parents are homeowners are likely to use gifts to buy or improve properties, whereas the least wealthy contribute to cars or driving lessons, paying off debts, educational or family expenses. Those in the first category are building wealth while those in the second category are still getting themselves in a position to earn it.

Amid the focus on high energy bills, which affect everyone (even wealthy Tory-voting pensioners), we must not lose sight of the fact that renting is far, far less affordable than ever before: UK average rents were up 10.8% annually in December – salaries most certainly were not.

READ MORE: 'Brexit radicalised me': Scots business owner forced to cut staff in half

Before the Scottish Government’s rent freeze was introduced in October, above-inflation rent increases had already occurred in seven parts of the country. When last month it was announced that the rent freeze was being extended, it had morphed into a rent cap.

That hasn’t stopped landlords requesting a judicial review of the legislation, which they claim is “disproportionate and unfair”.

Steady hikes in the Additional Dwelling Supplement – payable on all second homes costing more than £40,000 – is a step in the right direction, sending a clear message that properties should be for full-time occupation, not investment.

But dare anyone suggest that existing landlords – those who had no such tax to pay when they bought rental properties – should be examining their consciences? The politicians who are also landlords might be worth asking first...