Parents and grandparents are cashing in their buy-to-lets, acting as guarantors and remortgaging their homes in order to help younger generations buy their first home.
New research revealed some are even taking out new mortgages, including equity release, in order to find ways to get children or grandchildren onto the property ladder.
The study, in which equity release adviser Key quizzed 150 mortgage brokers, revealed the most common way for people to support family members through the Bank of Mum and Dad (BoMaD) was using savings. Indeed, 95% of grandparents and parents used their nest eggs.
Meanwhile, over a fifth were using their pension funds to give the younger generations a helping hand on their journey to homeownership.
Bank of Mum and Dad
BoMaD has been increasing in prominence over the last decade, as would-be first-time buyers seek family members’ help to combat the affordability challenges which restrict their ability to own a home.
Key said mortgage brokers estimated nearly half of first-time buyers were now partially funded by grandparents or parents.
But it also revealed advisers had received a surge in enquires from over-55s who were looking for equity release options so they could help their children and grandchildren on to the property ladder.
A fifth had had enquiries from older homeowners about selling buy-to-lets and holiday homes to support their children’s homeownership aspirations and a third had asked about acting as guarantors.
Meanwhile, more than a quarter were investigating the option of remortgaging and 21% were considering taking out new mortgages.
Intergenerational finances
Will Hale, CEO at Key, said advisers were foreseeing a surge in first-time buyer enquiries, which meant it was clear the property wealth of over-55s was increasingly playing an important role in tackling the intergenerational imbalance of property ownership.
“And it is really no surprise, given the fact that the average first-time buyer who wants to secure a good rate as they get onto the property ladder needs to find just over £25,000,” he added.
“That said, with the older generation often using their savings and pensions to help raise the deposit, there is a real possibility for this generosity to have a sting in its tail.
“Getting specialist advice which considers all options, including equity release, is vitally important to ensure that they make decisions which will benefit themselves and their families over the long term.”
