More than one in six first-time buyers (17%) will turn to their grandparents for help in getting on the property ladder.
According to research from the conveyancing team at law firm Simpson Millar, grandparents are increasingly giving a gift or loan to grandchildren to put towards their first home purchase.
Nearly half (46%) of first time-buyers are expecting to need some form of gift or loan from either parents or grandparents to make buying affordable – more than the 27% who received help from friends and family last year according to the latest English Housing Survey 2014-15.
The Bank of Mum and Dad still accounts for the lion’s share of gifts or loans, with one or both required in 43% of purchases.
But grandparents are increasingly being tapped for help with deposits, whether they are simply helping out their grandchildren or using gifts as a way of mitigating inheritance tax. House buying is increasingly a multi-generational affair, with one in seven prospective first-time buyers (14.5%) now saying they’ll need contributions from mum and dad and grandparents too.
Formal legal agreement
However, Simpson Millar is warning older relatives to ensure their generous contributions to the “forever home” doesn’t end up being put at risk in the many cases when relationships break down.
One-third of first-time buyers surveyed (33%) said they would proceed with no formal legal agreement in place to protect respective contributions to the purchase in the event of a split. Fears of damaging trust in their relationship were cited as a reason by 18% of respondents. Where one of a couple is using family money to make a greater contribution to the deposit, the firm is warning family donors to press for a simple legal agreement to protect all parties in the event of a parting of the ways.
Lisa Gibbs, conveyancing partner at Simpson Millar Solicitors, said: “The benevolent grandparent has always been a fixture in many a family. But it is only in recent years that this has routinely involved providing thousands of pounds to help the grandchildren reach the first rung of the housing ladder.
“Many grandparents nowadays are canny investors, with a portfolio of assets to fund their retirements. However, when it comes to helping a favourite grandson or granddaughter out with a deposit to buy with their intended life-partner, a bit more canny investment advice may be advisable.
“It is only sensible to have paperwork in place to ensure equity is shared equitably when ways part.”
