They set you up, your mum and dad. Had Philip Larkin written his poetry in the 2020s, he might have removed the expletive from his famous poem to reflect the reality of modern parental financial support. Children of wealthier parents start their adult lives with enormous financial advantages.
The Bank of Mum and Dad (Bomad) helps students by paying their university tuition fees and, even more importantly, with money for the deposit on their first property. This parental support seems to be increasing. According to the Office for National Statistics, 36 per cent of first-time homebuyers in England reported being helped by family and friends in 2022-23, up from 27 per cent in the previous financial year. A YouGov survey puts the proportion even higher: it found that between 2015 and 2020, 54.4 per cent of first-time buyers in the UK received financial help from their parents.
And there is plenty more assistance to come. Baby boomers have benefited from the massive gains in property prices since they stepped on to the property ladder in the 1970s and 1980s. As they die, their children will enjoy a substantial inheritance. A report for the Kings Court Trust in 2017 estimated that £5.5tn would pass between the generations over the following 30 years in the UK.
For those who believe in a meritocracy and in equality of opportunity, this trend has significant implications. In a new book, Inheritocracy, Eliza Filby writes that “If you’re under 45, your life chances and opportunities are increasingly determined by your access to the Bank of Mum and Dad, not by what you earn or learn.”
That perception is backed by research from the Institute for Fiscal Studies, published in 2023. It concluded that parental earnings are a much stronger predictor of incomes for those born in the 1970s and after, than they were for previous generations. A key part in this growing differential is wealth transfers between parents and their children.
There are long-term implications for social mobility. Figures show that children of poorer parents are less likely to access university. In 2021-22, the proportion of schoolchildren receiving free school meals who went on to higher education was 29.2 per cent; for all other children it was 49.4 per cent. That 20 percentage point gap has widened in recent years. When they get to university, students have to pay both for their tuition and for their living expenses; the result is that they will graduate with an average debt of around £44,000. But a lucky 5 per cent of students will avoid that debt, since their fees will be paid by their parents.
The result is what Benjamin Disraeli, the 19th century Tory prime minister, would have described as “two nations”. One group of graduates, unburdened by debt, and able to buy their home; the second group, saddled with student loans, and with little prospect of saving a large enough deposit to buy a property, with implications for their retirement and what they in turn can pass to their own children.
The question is, how did we get to the point where the Bank of Mum and Dad has become so important to the modern economy? And, in the coming years, are we likely to see its power fade — or increase?
The problem has its roots in 45 years of housing policy. At the start of 1979, the year Margaret Thatcher came to power, the Nationwide House Price Index was 941.1 (the base level of 100 was set in 1952). The index is now 14102.4. That fifteenfold increase in prices compares with average weekly earnings in the UK which have risen around eightfold, in nominal terms, over the same period.
An obvious problem is that higher house prices means bigger deposits. Zoopla estimates that the average deposit paid by a first-time buyer was £72,000 in the south-east and £144,500 in London. Across the UK as a whole, the average deposit for a first-time buyer has risen from £16,000 in 2000 to £60,000 in 2023. For those without parental resources, that is a huge amount to put aside.
What makes saving for a deposit even harder is the trend towards higher rents. The average monthly rent for a property in England was £1,348 a month in October, according to the Office for National Statistics, up 8.8 per cent over the previous 12 months.
There are ironies at work here. First, this enormous increase in the market value of our housing stock is one of the reasons why mums and dads have the ability to help their children in the first place. According to an ONS survey conducted between 2018 and 2020, the median wealth of those aged between 55 and 65 was £553,000.
Second, today’s house prices are only affordable at all because mortgage rates are much lower than they were in 1979, when the Thatcher government pushed up the base rate to 17 per cent. But the long fall in rates that started in the 1980s played a key part in pushing up those house prices.
But not the only role. The supply of homes has simply not kept up with demand. Back in 1979, 250,000 new dwellings were created. That figure hasn’t been reached in recent years, with completions well below 150,000 in the first half of the 2010s. Compare that with the rapidly increasing population. Between the 1971 and 1981 censuses, the UK population rose from 55.6mn to 56.3mn, an increase of 700,000. But between 2011 and 2021, the population increased from 63.3mn to 67mn, a rise of 3.7m. In other words, the population is growing a lot faster than 50 years ago, but the pace of building has fallen sharply.
This widening gap between house prices and earnings has changed the life trajectory of the average Briton. The average age of a UK first-time buyer was 23 in 1960 and 28 in the 1980s, but by 2023 had risen to 34 in London and to 33 in the rest of England. In 2000, 59 per cent of 25-34-year-olds owned their own home; by 2022-23, that proportion had dropped to 39 per cent.
Since people have to wait longer to buy a house, it is hardly surprising that they wait longer to have children, and have fewer of them. The fertility rate in England and Wales has fallen to a record low of 1.44 children per woman, while the average age of first-time mothers has risen to an all-time high of 29.3, up from 25.8 30 years ago. In the long run, the corollary of a falling birth rate is a shrinking workforce. That, in turn, will require more immigration, a politically contentious topic.
The political consequences do not stop there. An economy will operate most efficiently when it can make optimal use of all its citizens’ talents. But in the 100-metre sprint that is British life, some contestants are forced to compete in Wellington boots.
Take those graduates who are not in the lucky minority where their parents paid their tuition fees. Assume that they aspire to the kind of wage that allows them to dream of owning their own home. The interest rate for higher earners is the retail prices index plus three percentage points (currently 7.3 per cent) so this is not cheap debt. It is true that those who earn below £25,000 a year do not have to repay their college loans. But, as of April 2025, that sum equates to the annual income of a full-time worker earning the minimum wage.
The picture is not entirely rosy for the children of wealthy parents. Their inheritances may not be as large as they expect, not least because the government made pension pots subject to inheritance tax. In addition, their parents may end up in nursing homes, requiring expensive long-term care. In England, those with assets of more than £23,250 are currently required to pay for their own care; at least until the money (and the children’s inheritance) runs out. The money may run out quickly. The average cost of a UK elderly residential home is £60,000 a year, rising to £73,000 a year if nursing care is required.
Parents may also decide, once they have retired, to splash out on travel. Any listener to Classic FM, a radio station popular with the older generation, will be familiar with the many advertisements for expensive cruises. In the jargon, such activities are known as “skis” — spending the kids’ inheritance. Some retirees may take it too far and run out of money. A recent survey for Aegon, an insurance company, found that 55 per cent of adults expect to have to support their parents as they age.
Even those children who do not see their inheritances disappear will be waiting longer for the pay-off to arrive. People are living longer than they used to. Those people born in the 1960s could expect to lose their final living parent at age 58; for those born in the 1980s, this will not happen until they are 64.
It is possible that grandparents may decide to bypass their children in their wills and pass their money straight to their grandkids. There is also scope for them to give money while they are living. But the size of this Bank of Grandma and Grandad is rather smaller than Bomad. The Institute for Fiscal Studies estimates that just 9 per cent of all gifts received by family members (and 3 per cent by value) come from their grandparents.
Despite the pressure on older people, the long-term trends that have led to the current importance of the Bank of Mum and Dad will not quickly reverse. The government has a target of building 1.5mn homes in England by 2029 or 300,000 a year. But given that the current housing stock is 25.2mn dwellings, that will make only a small addition to the total; hardly enough to make houses suddenly affordable. By the same token, it seems unlikely that the real wages of twenty- and thirtysomethings are about to rise dramatically, making home ownership more affordable.
Indeed, it seems likely that inequality will widen over time. Of all the gifts made within families, the Institute for Fiscal Studies found that the largest 5 per cent of transfers made up more than half the total value. A second factor is “assortative mating”: those in better-off families tend to marry partners from similar social circumstances. A Resolution Foundation report in 2017 found that adults under 50 who are in couples and have no expectations of inheritance tend to have partners with an average expected windfall of £25,000. But those who expect to inherit more than £500,000 have partners who are likely to receive an average legacy of £190,000.
The situation is reminiscent of the old TV drama, Upstairs Downstairs about the upper classes and their servants in early 20th century England. In this case, the “upstairs” people are those who can afford to own a home with more than one storey and the “downstairs” people are stuck renting a flat. The divide could yet have political consequences as many young people feel their interests are neglected in favour of the retired.
As in Europe and the US, they may turn to populist parties who seek to tear up the political consensus. Whether such parties will improve the situation is another matter. In the meantime, those without access to the Bank of Mum and Dad should reflect on the irony of the old saying “choose your parents wisely”.
https://www.ft.com/content/4b7e81b3-d0c4-4ef5-9686-1ceee63a6c9b
