Bank of Mum and Dad causes concern for lenders

We’re all familiar with how important financial support from family members has become for young people saving for a deposit to buy their first home. Last year that support reached record levels, with house buyers receiving over £8 billion worth of lending from parents, grandparents and other family members!

In fact, in 2023, an astonishing 47% of all homes purchased by buyers under the age of 55 were bought with family support*. Even the term ‘Bank of Mum and Dad’ has been broadened to the ‘Bank of Family’, because these financial contributions are frequently made by other family members, and even friends.

Protection for lenders
As help with deposits has become more common, we have made sure that our Insolvency Act covers have evolved to address the issues faced by lenders. The biggest concern is when a parent or family member provides all or part of a buyer’s deposit, the lender’s security is at risk if that same family member is subsequently declared bankrupt. Should this happen within the five-year timeframe set out by the Insolvency Act, the property transfer can be set aside to help settle the debt. In these circumstances, our ‘parental help to buy’ policy protects the lender’s security, covering any shortfall in the outstanding debt under the mortgage. We also provide a non-parental policy option for transactions where the deposit was gifted by other family members or friends.

More cover options available
This is just one example where our Insolvency Act covers can protect lenders. Other options include where an owner gifts their property or sells it at less than its market value; a couple transferring equity from sole to joint names for re-mortgage purposes, or the reverse due to a divorce. Cover isn’t solely restricted to the original lender either. If the property is sold before the five-year period has expired, we also cover innocent third-party purchasers and their lender, where they are unconnected to the parties involved in the transfer/gift.

Whatever the situation, we have a range of Insolvency Act policies that can provide a solution. To see the full range of policies and get a quote online, look under the Insolvency Act heading on our products page, or you can email