Nici Audhlam-Gardiner is managing director of lifetime mortgages at OneFamily.
Nici Audhlam-Gardiner (pictured) is managing director of lifetime mortgages at OneFamily
Since the beginning of 2019 we have seen a distinct rise in the value over 55-year olds are releasing from their properties to help their loved ones.
Our data shows that the average loan now sits at over £110,000, up a quarter compared to 2018, when it was just over £85,000. In fact, loans taken out to gift money to family are now the largest of all. Nearly one in five of the mortgages taken with us in 2019 are for this purpose.
There are a number of factors driving this trend, the first being that families are using the substantial growth in the value of their property over the years, to help the younger generations get onto the housing ladder.
According to recent studies, UK house prices have increased from around £180,000 in 2013 to around £248,000 in 2018, a 40% increase while earnings have risen by just 11% over the same period.
Add to this new research from Zoopla that found the average city-dwelling Brit needs to earn £54,400 a year to buy their first home, it is no surprise that parents and grandparents are choosing to free up money for their own properties to help their younger relatives get onto the housing ladder.
The second factor driving this trend is so parents and grandparents can pass on a potential inheritance earlier.
The rise in life expectancy is causing wealth to move down generations at a much slower pace.
As demonstrated by the ONS intergenerational wealth transfer report, currently people aged 55 to 64 are the most likely age group to receive inheritance, which is when most people are typically more financially stable and less in need of the extra cash.
For parents and grandparents seeing younger family members thrive financially and in particular get on the property ladder is a milestone they want to see them achieve.
Lifetime mortgages are increasingly enabling families to help each other and share their wealth over the generations, which in turn is helping boost the economy and in particular the housing market.
The third factor contributing to this trend is product innovation, which has made lifetime mortgages more accessible for those wanting to gift money to their children or grandchildren.
For example, many lifetime mortgages have the option to make voluntary repayments of up to 10% of the initial loan amount each year, or to pay off up to 100% of the interest, because of this we have seen a number of parents who have taken equity from their property to help their children and then the children make the interest payments.
By making payments the interest on the loan is reduced and any remaining inheritance is protected.
Lifetime mortgages are boosting the economy by enabling homeowners over 55 years old to spend funds that would have otherwise been tied up for years to come.
The range of lifetime mortgages available also means that more homeowners than ever can access the funds in their property.
We will continue to evolve our lifetime mortgages to ensure we can provide products to meet the everchanging needs of consumers.
