‘Bank of Mum and Dad’ loans increased by almost a third

New research from Bank of Scotland has found that last year Bank of Mum and Dad loaned almost a third (29%) more money to their children compared to 2015. Parents forked out on average £3,987.22 to help their children financially in 2016, rising from £3,079.91 the previous year.

There was an increase in children aged 18-24 taking a loan from Bank of Mum and Dad, rising from a quarter in 2015, to over a third (34%) in 2016. In contrast however, less children aged 25-34 years of age borrowed from their parents, down from almost two fifths (39%) in 2015 to a third in 2016.

More Glaswegians borrowed money from parents than any other region (28%), followed by Aberdeen (24%), North East Scotland and Lothians (both 19%).

While there was no change to the number of children being helped by Bank of Mum and Dad (18% in both 2015 and 2016) the actual size of the loan has changed quite substantially over the year.

The number of parents lending their children over £10,000 has increased by almost a quarter (23%), but it’s only parents aged 45 and over loaning such high amounts. The amount of parents aged 45-54 years lending their children over £10,000 trebled over the year (from 2% in 2015 to 6% in 2016), while for the 55 and overs, the total increased by almost a third (31%) (from 16% in 2015 to 21% in 2016).

Rachel Bright, from Bank of Scotland, said: “It’s interesting to see the shift in size of loan being given to children by bank of mum and dad over the year.

“Fewer parents are lending smaller amounts of up to £1,000, yet more are now providing quite substantial loans to children of £3,000 or more.

“It’s very possible that this is parents helping their children with education costs or getting on the property ladder.”

The research also found that half of those who borrowed money from family felt guilty about doing so, up from 44% last year. Of all the age groups, those aged 45-54 felt the most guilty about borrowing from family (58%), while those in the North East Scotland top the regions at 57%.

Despite these increased feelings of guilt, only a third (34%) of Scots now expect to have to pay the money back to the family member, which is 15% down on the previous year (40%). There has been a particular change in expectations with those aged 18-24 years, as a quarter (24%) expect to have to pay the money back now compared to almost half (44%) in 2015.

Similarly, there was a shift in the number of Scots who do not expect to have to pay the family member back the money borrowed, up a third from 9% in 2015 to 12% in 2016. In particular, there was a steep increase in the number of 25-34 year olds who don’t expect to have to pay the loan back, rising from 5% in 2015 to 13% in 2016.