A significant number of parents and grandparents are tapping into their property wealth to help younger family members buy homes, according to new research from Legal & General and the Centre for Economics and Business Research (Cebr).
The study reveals that 42% of those aged 55 and over have financially assisted a family member’s property purchase, often without seeking professional advice.
The study outlines a range of methods used to fund these substantial financial gifts. While savings are used by 68% of parents and grandparents, 22% turn to investments and 14% to their pensions. Notably, 18% leverage their own property wealth, either through equity release, downsizing or remortgaging.
Craig Brown, CEO of Legal & General Home Finance, said: “Property is often one of the most significant financial assets families have. Many parents and grandparents feel there is no better use of that asset than to provide for the future of their loved ones.”
These contributions are not insignificant; the average amount gifted stands at £25,600. In addition, 11% of Legal & General Home Finance’s own customers took out a lifetime mortgage in the last year specifically to offer financial assistance to a family member.
However, the research flags a worrying trend. A staggering 72% of parents and grandparents who provided such support did not consult with financial advisors. As a result, 69% reported negative effects on their own finances, although most did not experience a change in their standard of living.
Brown added: “This is a big decision and people should carefully consider how and what they gift to ensure they don’t risk their own financial difficulties later in life.”
To address these concerns, Legal & General has introduced a ‘Guide to Gifting,’ aimed at better informing parents and grandparents about the financial implications and options when supporting loved ones. The guide seeks to ensure more responsible management of the £3.5 trillion in housing wealth held by the nation’s over 55s.
The report also highlights that direct financial gifts are not the only form of familial support. A third of parents and grandparents have allowed adult children to move back home to save for a deposit, thereby avoiding an estimated £24,900 in costs.
