Parents are spending so much money to get their children onto the housing ladder that they have become one of the biggest lenders in the UK, a survey suggests. But as homebuyers rely on their parents, it may mean parents will struggle later on in life and have smaller pension pots.
The average parental contribution for homebuyers this year is £24,100, up by more than £6,000 compared to last year, according to Legal & General (L&G). Collectively parents have given £6.3bn, meaning parents would pay enough to rank 10th if they were a mortgage lender. The UK's 10th largest mortgage lender, Clyesdale Bank, only lent £5bn last year.
L&G said thousands of UK buyers rely on their parents to either get onto the housing ladder or upgrade to a larger home. Almost a fifth of those who said they had or would help a family member buy a home, said it was because they felt it was their responsibility to help their family.
A financial services firm has warned that although parents’ generosity is beneficial for their children, it could lead to a lesser standard of living for them once reaching retirement. L&G's research, based on a poll of 1,600 parents, found that more than half were using cash to help their children, but others were withdrawing money from their pensions or said they would consider using equity release from their homes.
Despite this, the poll found that more than a quarter of those surveyed were not confident they had enough money to last through their retirement, whilst 15% said they had already accepted a lower standard of living to help out their children.
To help plan for your mortgage and savings, get in touch with the Charles James team today.