The release of pent-up demand in June and July was something many of us in the industry predicted, but I doubt it was to the extent we’re seeing now – it could well continue into the final months of 2020.

In five out of the last seven weeks, we have seen lending through Legal & General Mortgage Club at higher levels than in 2019. This includes borrowers remortgaging, but a large part of this activity is purchase business as buyers are completing and moving house – a sure sign that the sector remains resilient.

That tap is not fully on, either. Once volumes at lower LTVs start to cool, demand in the high-LTV market provides more opportunities to keep this momentum going.

However, despite the significant levels of activity, high-LTV remains a challenge for lenders, advisers and buyers. Few lenders are active in this sector, and those in the market are struggling to cope with demand.

This isn’t just making the prospect of stepping onto the ladder more distant for thousands of would-be first-time buyers – it also means that the Bank of Mum and Dad is once again playing a key role in the housing market.

BoMaD steps in

Earlier this week, Legal & General launched its latest Bank of Mum and Dad research. By one metric, this year the BoMaD appears to be scaling back – it will support 85,000 fewer transactions than in 2019.

Yet, despite the fall in transactions, BoMaD is simply mirroring the UK’s housing market lockdown, which saw overall property transactions collapse during April. This year, more buyers will rely on their family or friends for financial help to step onto the ladder.

The percentage of transactions the BoMaD supports has even risen to nearly a quarter (23 per cent). Generous relatives will support £50bn worth of housing transactions, and the BoMaD’s role is set to grow further. A third of people planning to buy in the next five years (33 per cent) expect to do so with financial support from parents, grandparents, family or friends.

The news from Nationwide this week that house prices have reached a record high could even increase that reliance on the BoMaD yet further, with hopeful buyers requiring larger deposits to make their first step.

New opportunities

The presence of the BoMaD in the mortgage market presents opportunities for advisers, too.

While the majority of BoMaD lenders – that is to say those gifting the money – are providing cash from savings, Isas, pensions or inheritance, other routes and ways of providing financial support are vastly underused.

The over-55s are giving thousands of pounds to relatives, often putting retirements at risk. Yet just 6 per cent of over-55s are using equity release to access cash as part of the BoMad. This route, as well as specialist products, including family support mortgages, could provide alternative means for the BoMaD to step in without risking its plans for later life. Advisers will be key to raising awareness of these options.

A helping hand

The BoMaD, while generous, is a symptom of Britain’s broken housing market. There are thousands of FTBs and others who simply won’t be able to access this financial support. If we’re not careful we risk a generation being locked out of the housing market.

High-LTV mortgages are still so important for these buyers, and I’m hopeful that we will see more lenders return to 90 per cent in the near future. But there are alternatives for these buyers to make their homeownership ambitions a reality.

L&G’s recent consumer research pointed towards more buyers looking to housing schemes in their plans to buy this year for instance. In particular, Help to Buy and Shared Ownership are popular choices, but joint borrower/sole proprietor products offer an alternative route for buyers to overcome some of the affordability challenges, without having to rely on financial support from the BoMaD.

At Legal & General Mortgage Club, we are championing advice as a priority in today’s market and this week I gave some top tips to readers of The Mirror for those looking to buy in this ‘new normal’.

Seeking independent mortgage advice is a central theme. With ever-changing product criteria, unprecedented demand and a Bank of Mum and Dad that could stretch beyond its own means, buyers absolutely need a mortgage expert on their side today.

Kevin Roberts, director, Legal & General Mortgage Club