Parents have provided over 228,000 first time buyers with more than £1.31 billion in deposits over the past five years, according to new research from The Equity Release Council.
Typically, 30 per cent of first time buyers are given financial help from their parents, with the average ‘helping hand’ amounting 20 per cent of a buyer’s first despite, suggesting that parents have injected an average of £23.05 million into the housing market every month.
Typical amount of parent first time buyer finance provided each year:
The study also found that 6 per cent of new purchases receive an average of 18 per cent of their deposit from older relatives, such as their grandparents, over the last five years.
Although 23 per cent of respondents said that, as parents, they are proud to support their children, and 14 per cent derive pleasure form seeing their families enjoy the money, there is still cause for concern.
Indeed, 43 per cent said that providing such capital made parents worry whether they could aid their children financially and 36 per cent were worried that they would be able to continue to ‘survive financially on their own’.
54 per cent said that ‘the bank of mum and dad’ had a negative impact on their families: 17 per cent said that one child receiving more than another caused frustration, with the same proportion claiming that having to continue helping their children caused annoyance.
On the other hand, 15 per cent worried that by providing financial help, older relatives might be more likely to lose money in later live.
The impact of such help was keenly felt by the Equity Release Council’s respondents: 8 per cent of children felt their parents had delayed retirement, 10 per cent felt that their parents had used retirement savings and 3 per cent reported that parents had remortgaged in order to help their them.
Andrea Rozario, Director General at the Equity Release Council, said: "
With the average first time buyer putting down a deposit of £27,000 to buy their home, it is unsurprising that people are looking to their parents for help. However, while the vast majority of parents (and grandparents) are likely to want to help, it is not always financially viable – especially if you have more than one child.
Andrea added: “It is concerning that some people are delaying giving up work, using retirement savings or even remortgaging their homes to help their children financially. Not only can this decision cause ill feelings among family members but it may also have a detrimental impact on the parent’s standard of living.
“However, with the UK’s over-55s having a substantial amount of housing equity, it is possible to use equity release to take out some of the value of their homes so they can pass it on to the younger generation. People who think this may be an option should speak to a financial adviser who can help them to make the best choice for their individual circumstances.”
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