While eight in 10 (79%) middle class parents are helping support their adult children financially, one in four helped with mortgage payments specifically, according to the Saltus Wealth Index Report.
The average rate for a 2-year fixed deal recently exceeded 6%, which pushed the average repayment on a 25-year £200,000 mortgage up £383.50 in just two years.
Over a two-year period, that was found to amount to an extra cost of £9,204; many households have struggled to cover that extra cost, increasingly turning to ‘The Bank of Mum and Dad’ for help.
Saltus surveyed more than 2,000 people in the UK with assets, and found that 20% were helping their children with rent.
According to the Saltus Wealth Index Report, 39% said rising mortgage rates were putting a strain on their own cashflow, and a further 47% said further rate rises would cause issues.
Nevertheless, they were still willing to provide support to their children; 22% reduced their own pension contributions, 20% accessed housing equity, and 20% sold another asset in order to help.
Among respondents aged 45 and over, 7% said their children’s wellbeing was their greatest concern – above losing money and their own health and safety.
Mike Stimpson, partner at Saltus, said: “Our research shows just how much financial support adult children need in the current climate, and the lengths to which their parents are prepared to go to help them.
“Traditionally, parents have helped out their children with deposits on houses, and other investments that grow with them, but now, we’re increasingly seeing clients forced to bring those investments forward to help their children with everyday costs such as mortgages and household bills.”
He added: “Saltus Wealth Index research shows one in four parents who are helping their children are doing so specifically to help with rising mortgage costs, and that one in five have reduced their own pension contributions in order to provide that financial support to their children, and we are certainly seeing this mirrored in what our own clients are doing.
“Many are now putting less money into their pension so that they can help their adult children with mortgage payments and utility bills, others have had their children move back in with them because they can’t afford to pay their rent, and some have even delayed their retirement so they can continue to provide support.
“While our research suggests that most parents are more than happy to help support their adult children where they can, this level of reliance is not sustainable.
“If the younger generation continue to rely so much on their parents, it is going to have a huge knock-on effect on the whole family.
“Their parents have been planning for their retirement – and in most cases, planning the best way to pass on an inheritance – based on their own needs, not necessarily the needs of their children.
“Many parents will now need to revisit their plans to ensure they are still realistic given these changes in circumstances.”
