Many parents and grandparents who helped finance a property purchase for a first-time buyer did so using their own assets, a Legal & General survey has found.
The so-called Bank of Mum and Dad – or Bank of Family for those supported by grandparents – has helped ensure that 42% of all homes will be bought by buyers under 55 by 2024, new research has found.
But of those purchases, 19% were made by parents or grandparents, who either cut back or used up money equity release or transfer.
The research, commissioned by Legal & General and conducted by the Center for Economics and Business Research (Cebr), highlights not only the enormous contribution that the Bank of Family makes, but also how existing real estate assets are the key to these problems. gifts for many.
The ‘Bank of Family’ is expected to contribute to a total of 335,000 residential property transactions by 2024 – the largest number of property purchases since Legal & General began tracking loans from family members in 2016. It is also predicted that donations from parents and grandparents will reach £11.3. billion by 2026.
Of the fifth of people using real estate assets, 12% are downsizing, 8% are using equity releases and 4% close.
Among Legal & General clients, 9% used equity release for financial donations in the first six months of the year.
While donors who use equity release are required to seek financial advice, the research shows that the vast majority of parents and grandparents who have made a financial gift (74%) do not have the help of a professional invoked before parting with their money.
Lorna Shah, managing director of Retail Retirement, said: “Property remains one of the most important assets for families across the country, so it is no surprise that family members are using it to provide financial support to younger members buying a home.
“Although products such as lifetime mortgages are always supported by specialist financial advice, it is important that everyone does so give an important gift seek help from a financial advisor, even though their property is not the source of their money.
“Our research shows that very few parents or grandparents currently seek professional advice when offering financial gifts to family members, unless they use a fully advised product such as equity release, and this may in the long term impact their finances.
“As equity release becomes more mainstream, more people are likely to turn to this assistance. The ‘Bank of Family’ is forecast to have a busier year than ever, so we could see more people drawing wealth from their assets to support their loved ones.”