Financial gifts from the ‘Bank of Family’ to support home purchases are projected to reach £9.2bn this year, and fund 42% of all homes purchased by buyers under 55, research from Legal & General and the Centre for Economics and Business Research (Cebr) has revealed.
With average contributions hitting £27,400, this is the highest amount families have gifted since Legal & General began its research in 2016.
This increasing reliance on the ‘Bank of Family’ underlines the challenges faced by would-be buyers who do not have access to family support.
The majority of recent or prospective ‘Bank of Family’ recipients said they would have to delay their home purchase without financial help.
One in five (21%) said they would have to delay their home purchase by more than five years, while 9% of first-time buyers said they would not be able to buy at all.
Of the average 335,000 property purchases the Bank of Family has supports – an estimated 204,000 will be funded with assistance from parents, 42,000 bought with funds from grandparents, and 88,900 from other family members or friends.
While the majority of gifters used cash savings to help their loved ones to buy (48%), 40% used ISA savings and investments, and 12% tapped into pension savings, taking a cash lump sum from their pension pot to help.
Property wealth was another key source of gifted funds in almost one in five families (19%), either through downsizing (12%), equity release (8%), remortgaging (4%) or a combination of these.
Half of family members (49%) providing financial support said giving the money left them feeling less secure about their own financial position.
A further one in 10 (11%) said giving money negatively impacted their standard of living.
More than a third (35%) of relatives have brought adult family members to live with them rent-free; a further 39% were open to providing similar support to their adult children in the future.
Legal & General estimates that buyers save an average of £32,600 when living with family members, which they can put towards their deposit.
Bernie Hickman, CEO of Legal & General Retail, said: “This research shows that families across the generations are facing tough decisions as they try to balance the aspirations of today, with the needs of tomorrow.
“We need to look at what could help all generations achieve better financial security, enabling them to build savings and assets today, and sustain their financial adequacy through their later years too.
“Almost a quarter of families are using property wealth to help younger generations onto the property ladder, but this option isn’t available for everyone.”
Hickman added: “When people are making difficult and complex choices like these, understanding all the options, and what the long-term impact of choices might be, is really vital.
“We and other providers have lots of education tools and resources available, such as our Guide to Gifting, and our podcast, ‘A Little Bit Richer’, which is aimed at a younger audience.
“This is also where getting professional advice can be very valuable; an adviser can help you understand all your options.”
