Rising number of parents take legal action over ‘Bank of Mum and Dad’ loans

An increasing number of parents are taking legal action to get their money back following the Bank of Mum and Dad (BOMAD) loans to help their children buy their own home.

Recent research has found that there are 12-15 cases each month of parents taking their adult children and their spouses to court to recover their money.

According to the latest research, this figure has increased significantly since 2014, when there were just three cases per month.

BOMAD has become the tenth biggest lender in the UK, with lending totalling £6.3 billion in 2019, while Clydesdale, the UK’s tenth largest lender, has lent £5 billion in the same period.

The average amount that parents lend their children has increased to £24,100, but some parents are arguing that the money is an investment, rather than a gift.

Experts believe that the most common reason for legal action was when their child split from their partner.

A problem can arise when the parents of one of the children contribute a significant amount of money towards a property purchase, but they do not agree what the terms of that contribution is – whether it a gift, an investment or a loan.

A rise in house prices has seen parents become more likely to lend to their children in order to help them get on the housing ladder, while one in five of all financial transactions can be attributed to the Bank of Mum and Dad.