How the Bank of Mum and Dad reshaped the British economy

The article discusses the growing reliance on the “Bank of Mum and Dad” (Bomad), a term for financial support provided by parents to their children, which has become a key factor in shaping economic opportunities and social mobility in the UK. Wealthier parents increasingly help their children with university tuition, living expenses, and substantial deposits for purchasing homes, giving them a significant advantage in life.

A significant portion of first-time homebuyers in the UK now rely on family assistance. In 2022-23, 36% of buyers received financial help, up from 27% the previous year. Additionally, inheritances are set to transfer £5.5 trillion between generations over the next few decades, solidifying the role of family wealth in economic mobility.

Rising house prices and stagnant wages have pushed home ownership out of reach for many young people without family wealth. The average deposit for first-time buyers has increased from £16,000 in 2000 to £60,000 in 2023, while rents continue to climb, making it harder to save. Students without parental financial help often graduate with significant debt (averaging £44,000), while others avoid debt entirely. This creates a stark divide between those able to buy homes and those left burdened by debt and limited savings.

The disparities in access to family wealth undermine meritocracy and social mobility, as parental resources increasingly determine life outcomes. The divide is particularly evident in higher education and housing, where poorer families struggle to provide their children with the same opportunities as wealthier ones.

Housing policies and demographic changes further exacerbate these challenges. The UK has failed to build enough homes to meet rising demand, leading to skyrocketing house prices. Meanwhile, the average age of first-time homebuyers has risen to 34, compared to 23 in 1960. This has delayed family formation and contributed to record-low birth rates, which could have long-term economic and social consequences.

Future trends suggest that inequality will only deepen. Wealthier families are likely to continue passing down larger inheritances, while assortative mating—where individuals marry within their economic class—further entrenches wealth gaps. Government housing targets are unlikely to meaningfully address these issues, leaving many young people without access to affordable homeownership.

There are potential political consequences to these growing inequalities. Young people excluded from homeownership and economic opportunities may turn to populist movements, expressing dissatisfaction with the status quo. This could disrupt the political landscape, though whether such movements will lead to meaningful improvements is uncertain.

Despite the critical role of Bomad, it faces challenges. Rising care costs for aging parents, changing tax policies, and increased spending by retirees could shrink inheritances for future generations. Nonetheless, the reliance on parental wealth is reshaping economic opportunities in the UK, deepening divides between those with access to family resources and those without. Without significant policy changes, these trends are likely to persist, further entrenching inequality.

For more information see Philip Coggan “How the Bank of Mum and Dad reshaped the British economy” The Financial Times, November 29, 2024. 

Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.