Why has the borrowing and lending of money between family members decreased?
Borrowing from Mom and Dad’s Bank has fallen sharply over the past year as families adjust to new financial pressures caused by the pandemic.
The proportion of people who borrowed money from family and friends rose from 31% in March 2019 to 22% by March 2020, according to a study by Lloyds Banking Group. The number fell again to 13% in June, after foreclosure restrictions were imposed.
The share of those who have loaned money to loved ones has halved, from two-fifths (40%) in March 2019 to 19% in June 2020.
Jo Harris, chief executive of Lloyds Bank, said the financial uncertainty experienced over the past year had been made worse by the pandemic, but it had effectively discouraged lending and borrowing between family members.
“The foreclosure has resulted in reduced spending, leaving some with more excess cash each month, and many may have taken the opportunity to pay off debts or increase their savings,” she said. “With the loan, there may be a reluctance to apply for a loan from friends and family, recognizing that the pandemic means loved ones may be less able to help than they have been by the pass. “
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People of all age groups borrowed less, but those aged 18 to 24 posted the largest decline when it came to applying for financial help, the 51% share who borrowed from friends and to the family during the year until March 2019 decreasing to 30% in June 2020.
Lloyds research, which was based on surveys conducted in March and June of more than 5,000 people by YouGov, found that the main reason for borrowing money from friends and family was to fund money. existing debts, cited by 16%. Car purchase and home improvements were next at 14 and 12 percent, respectively.
The survey did not specifically ask respondents if they had borrowed for a deposit for renting or buying a home, one of the big ticket items often associated with mom and dad’s bank.
However, a separate study released in July by real estate agent Savills shed some light on this issue, estimating that about two-fifths of all mortgage first-time buyers received homemaking last year; an estimated contribution of £ 5 billion (S $ 9 billion) in 2019.
Savills said first-time home buyers now face greater barriers to securing a high-value mortgage than during the 2007 credit crunch, leaving them more dependent on family members to raise enough money. for a deposit.
At the same time, the latest £ 5bn figure was almost £ 1bn below the estimated loan level two years ago, with the government’s Help to Buy program playing a bigger role in support for first-time buyers in recent years.