Bank of Mum & Dad – are parents charging their children interest?

Some 25.6% of parents said they would charge interest on a home loan to their children, a new study from UOWN has shown.

While securing funding from the Bank of Mum & Dad is a popular way for millennials to meet stricter mortgage criteria and cope with rising property prices, fresh results suggest that it may not be the most affordable method of borrowing.

The crowdfunding property service surveyed 2,500 parents in Britain who have loaned their children money for a home, revealing that over a quarter of parents would consider charging interest on a loan.

Of that 25.6%, the Bank of Mum & Dad interest rate is 4.3%, much higher than the standard bank interest rates of 2% or lower – meaning that parents could profit greatly from giving their offspring a foot on the ladder.

However, this is still a huge risk for parents if their kids do not qualify for a loan through traditional financing, so high interest rates could cover their back.

What’s more, the large sum of money could potentially be invested elsewhere, therefore, getting a good return on their loan could help to soften the blow.

To see how the Bank of Mum & Dad interest rates compare across the country, view the infographic here.