Parents donate £223 billion to help offspring onto property ladder

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by Kay Murchie

Research from independent financial adviser, Heartwood Wealth Management, said 5.5 million British parents have given £116 billion to their to their children to help get them onto the property ladder, with an average contribution of £20,921 per child.

The group’s study established that the bank of Mum & Dad is being called upon even more with cheap mortgages being withdrawn from the market and in spite of house price falls, prices are still beyond the reach of the majority of first-time buyers.

Helping children onto the property ladder is most prevalent amongst the wealthiest households nationwide, where two thirds of parents have either given, or intend to give, their children financial help towards purchasing their first home, with an average amount given of £29,765.

Already, over 150,000 UK parents have given their children more than £100,000 towards purchasing a home.

Of those who have provided financial help to their children in buying a home, research shows that only 10% are treating the financial help as a loan, expecting it to be repaid in full. However, 68% have made the donation and expect none of it to be returned.

David Lough of Heartwood Wealth Management said given the size of the sums involved, it is crucial that parents factor this into their financial plans, particularly as our research shows that those parents preparing to make this gesture, on average, expect to see just 5% of their outlay returned to them.

Mr Lough added that a parent’s financial responsibility no longer stops after university. A property can now cost up to 10 times a first time buyer’s early salary, rather than 3 times as it was a generation ago.

With some lenders demanding deposits of 35%, mortgages simply cannot cover the gap, so parents are facing up to the fact that they will be making a sizeable contribution to the equity in their children’s homes, continued Mr Lough.

Typically parents face this burden just as they need to accelerate saving for their own longer retirement, so it is vital that their financial planning reflects this. Their fifties are becoming an increasingly anxious financial decade for today’s parents, concluded Mr Lough.