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24 Jun 2019

Parents pay £6bn towards helping children buy a home

Thousands of first-time buyers getting help from loved ones to buy property

Parents are expected to pay out billions of pounds to help their children onto to the property ladder in 2019, with the average contribution rising to £24,000.

This is based on new forecasts by Legal & General and the Centre for Economics and Business Research (CEBR). Indeed, the figures mean lending from 'the bank of mum and dad' is now equivalent to the UK's 11th biggest mortgage lender.

But handing over cash isn't the only way to help your child buy a property.

Which? reveals the scale of support from families to first-time buyers and homeowners and explains how families can contribute to their child's property purchase.

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How much are parents contributing?

Parents are forecast to lend £6.3bn this year, up from £5.7bn in 2018, according to the CEBR estimates. Indeed, parents are expected to support one in five property transactions.

The amount parents are lending has also increased compared with last year. In 2019, the average contribution to loved ones is predicted to be £24,000 - a rise of £6,000 from 2018.

Yet even as parents give more, the number of property sales supported by family members is expected to drop by 20% - from 316,000 in 2018 to 259,400 this year. This could be the result of a national trend of less property sales amid uncertainty over the impact of Brexit on the economy and house prices.

The CEBR's forecast of property transactions for 2018 and 2019 is based on surveys of lenders and borrowers by YouGov and, and an estimated total contribution from parents.

Who are parents helping buy homes?

It's not just aspiring homeowners getting help. While first-time buyers benefited from 55% of family contributions, the other 45% went to people moving or upgrading their home.

Perhaps unsurprisingly, millennials (those aged 35 and under) continue to rely on mum and dad the most, with six in ten expected to have financial support to buy a home.

But the findings show more than a fifth of people aged 45-54 could also receive financial assistance from loved ones towards their latest property purchase.

Hotspots for bank of mum and dad

As house prices climb around the UK, parents are also being more generous.

In the North West, the average family contribution is expected to nearly double from £12,900 to more than £24,000 over the past year, while the South West saw a rise of more than £10,000 since 2018.

The biggest average family contribution is predicted to be £31,000 in London, where properties are generally more expensive than other UK regions.

Yet this is nearly the same average contribution as Wales (£30,600), where house prices are significantly lower than in the capital.

The map below shows the average expected contribution from families in UK regions. Figures for Northern Ireland were not available.

How can parents help first-time buyers

Buying a home is a dream for many, but it's often difficult to achieve without some type of help.

Aside from giving a cash sum, there are various other ways parents can help first-time buyers.

Gifted deposits

The most common way parents contribute to their children's property purchase is making a cash gift towards the deposit.

If you plan to do this, you'll typically need to write a letter confirming the gifted deposit to the mortgage lender, and a declaration stating you have no interest in the property.

Your child's conveyancer may also want bank statements as proof of the cash gift or loan.

Keep in mind that if you expect your child to you back, the mortgage lender may treat this as a loan and factor it into how much they agree to lend.

Guarantor mortgages

A guarantor mortgage involves a parent or close family member offering their home as security against their child's loan.

This means your child may be able to borrow up to 100% of a property's value. By acting as a guarantor, you're agreeing to cover the mortgage payments if the homeowner misses a payment.

There are substantial risks for both child and parents if payments are missed or, in the worst case scenario, the home is repossessed and sold.

Family offset mortgages

Under an offset mortgage, you put your savings into an account linked to the child's mortgage.

These savings are deducted from the loan the homeowner pays interest on.

We explain how it works in our guide to offset mortgages.

Joint mortgages

Another option is to buy the home together. You'll usually both be named on the mortgage agreement and on the deeds, providing you with some power over any future transactions.

Under this arrangement, you would both be liable for keeping up the mortgage repayments. If you already own a property, you'll probably have to pay the second home stamp duty surcharge.

Joint borrower sole proprietor mortgages

While similar to a joint mortgage, the key difference is that only your child is named on the property deeds.

This means they alone own the property, but both you and your child are responsible for the mortgage repayments.

Buying a property without help

Getting on the housing ladder without family assistance is far from easy in the current climate, but not impossible.

Some lenders will offer 95% mortgages, which only require you to save up a 5% deposit. While rates tend to be higher than if you had a larger deposit, they are becoming more competitive.

Alternatively, you might want to apply for the Help to Buy equity loan scheme. This is a loan from the government of up to 25% of the property price (or 40% in London) towards a new-build home.

You would need a mortgage to cover the rest of the property value and at least a 5% deposit.

Alternatively, you could start small with a shared ownership property, where you buy a portion of the home and then scale up your share in future years.