Analysis by specialist bank, Aldermore, found equity release, downsizing and remortgaging were also common methods used by parents to help their sons or daughters purchase their first property.
It discovered a quarter of prospective first-time buyers planned to use the Bank of Mum and Dad to help fund their deposit, and more than half of those said their parents’ cash savings would be the source of this finance.
Just under a quarter of those using their parents’ money to fund their house purchase were benefiting from equity release – where money invested in the family home is released as cash – a fifth were relying on their mum and dad downsizing.
Living at home
Parents were also supporting their children in other ways. One in five potential first-time buyers were currently living in the family home so they could save money to use for a deposit.
Aldermore said, figures from 2017 revealed this would be costing their parents an average of £4,996 in food, petrol and utility bills.
Damian Thompson, director of mortgages at Aldermore, said there had been a ‘stark fall’ in homeownership amongst young people in the past two decades.
Indeed, according to the Resolution Foundation, a typical new buyer needed 18 years to save for a deposit in 2018 – this compared to only three years in the mid-1990s.
A necessity
Thompson said this was unlikely to change any time soon and this meant the need for the Bank of Mum and Dad to provide support was becoming a necessity rather than simply a helping hand.
He added: “Dipping into cash savings has become common for parents to help their children, but almost half are looking at more substantial measures.
“For those looking to free up housing wealth, seeking financial advice on what options best suit individual circumstances is crucial. There has been an expansion in product offerings in recent years that provide alternatives to moving house and downsizing.”
The ways parents will be assisting to fund their child’s deposit (source: Aldermore)
| How will your parents/family assist you to fund your deposit? | % of prospective first time buyers |
| They will use their cash savings | 54% |
| They will release equity in their property | 24% |
| They will move and downsize | 19% |
| They will remortgage their property | 17% |
| They will take a cash lump sum from their pensions | 6% |
| They will sell their second property | 4% |
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