The ‘Bank of Family’ is set to give a record £9.2 billion to help family members get onto the property ladder this year, with nearly half of buyers receiving financial support from parents and grandparents.
Financial gifts from family are projected to fund 42% of all homes aged under 55 this year, according to new research and forecasts from Legal & General and the Centre for Economics and Business Research, with average contributions at £27,400. This is the highest amount families have gifted since Legal & General started carrying out its research eight years ago.
The majority of the 335,000 property purchases the Bank of Family is projected to support this year are funded with financial help from parents, with 204,000 supporting their children. A further 42,000 purchases are made using funds from grandparents, and 88,900 with help from other family members or friends.
Nearly half (48%) of those providing financial assistance said the money is coming from cash savings, whilst 40% are using ISA savings and investments, and 12% are using pension savings, taking a cash lump sum from their pension pot to help. Others are tapping into their own property wealth to help their offspring to buy. One in five (19%) of those providing support are doing so by downsizing their property, whilst 12% are using equity release, and 8% are remortgaging.
Bernie Hickman, chief executive at Legal & General Retail, said: “Almost a quarter of families are using property wealth to help younger generations onto the property ladder, but this option isn’t available for everyone. When people are making difficult and complex choices like these, understanding all the options, and what the long-term impact of choices might be, is really vital.”
Challenges facing first-time buyers
Many first time buyers would find it totally impossible to achieve their home ownership dreams without financial support from family.
One of the biggest issues they face is saving a deposit, whilst paying rent at the same time. Higher interest rates in recent years have also made things harder for first time buyers, making affordability of mortgage payments a major challenge.
According to Legal & General more than a third (35%) of relatives have invited adult family members to live with them without asking them to pay rent, so that they can save towards buying a home.
Mr Hickman said: “This research shows that families across the generations are facing tough decisions as they try to balance the aspirations of today, with the needs of tomorrow. We need to look at what could help all generations achieve better financial security, enabling them to build savings and assets today, and sustain their financial adequacy through their later years too.”
