More and more first-time buyers are turning to the Bank of Gran and Grandad as affordability becomes increasingly stretched due to soaring house prices and flat wage growth.
The latest research from Saga Money shows that the grandparents have donated over £37 billion in funds to their grandchildren, with one in 10 saying this money was to be spent on a deposit for a house.
The typical donation from grandparents is £9,365, with those in London and the South East giving the largest deposits, although grandparents in Yorkshire are some of the most likely to gift to their grandchildren.
The generous donations look set to continue, with a further third of grandparents considering or intending to give a financial gift, while one in 10 are considering lending money to grandchildren.
Grandparents say that they view the gifts as an early inheritance, with over half saying that they would rather see their relative enjoy the money than wait to leave it as an inheritance.
In keeping with this generous spirit many grandparents do not specify what the money should be spent on – four in 10 are happy for it to be spent on whatever their grandchildren would like to buy themselves.
Other expenditure from the Bank of Grand and Grandad goes on education, (23%), holidays (13%), driving lessons (12%) and house deposits (9%).
Alex Edmans, head of product at Saga Money, said: “Most of the money grandparents are gifting is coming from their cash savings, so whatever small amount of interest they are missing out on is clearly outweighed by the joy they get by seeing their grandchildren benefitting from the money.
“If you are giving your grandchildren support as a loan rather than as a gift it pays to take a few sensible steps so there is no awkwardness later on. Only half of grandparents say they discussed repaying the loan with their grandchild, our advice is to be upfront about the conditions of the loan including how you would like the money repaid in order to avoid difficult conversations at a later date.
“Our customers are increasingly turning to gifting money through equity release in order to help grandchildren onto the property ladder. On average they take £33,000 out of their property in order to give to family.”
[box style=”4″]
What Mortgage has teamed up with London & Country to offer you expert advice on the right mortgage deal.
Whether you’re buying a new home, remortgaging to a new deal or buying an investment property, L&C can help – and you’ll pay no fee for their advice. To find out more, click here.
[/box]
