How much do prospective homeowners receive from their family to secure homeownership?
Nearly one in five of parents and grandparents in the UK are helping their family members secure homeownership through property wealth amid increasing mortgage rates, according to a new study.
The report from Legal & General comes at a time when people aged over 55 hold more than £3.5 trillion in housing wealth.
The research reveals that aspiring homeowners are receiving an average of about £25,600 from relatives.
However, 72% of parents and grandparents who helped the younger generation did not seek any advice before supporting their family with a house purchase. As a result, the study revealed that an additional 69% were seeing a negative impact on their own finances.
Equity release products have become a “critical financial vehicle to stimulate the housing market as the UK and the rest of the world go through economic turbulence. It allows homeowners to assess an amount of capital tied up in their home and turn it into cash without moving out of their property.
Senior Capital’s managing partner Rudy Khaitan noted the benefits of equity release in stimulating the housing market in a period of rising prices. According to Khaitan, property was often one of the most significant financial assets for family, especially since the UK had seen a boom in house prices over the last 10 years.
Khaitan suggested that by unlocking the “frozen” capital, the market would start seeing “greater activity” from first-time buyers (FTB), This happened because affordability issues had remained persistent, with a 22% fall in the number of FTBs between January and August, according to Halifax.
He also noted that amid the rise of the cost of living, many people over 55 found themselves in a “paradoxical situation” as they were asset-rich through their homes’ value, but they were cash-poor because they had limited disposable income.
Meanwhile, equity release solved this dilemma by allowing homeowners to use their property wealth, he said, adding that such a form of financing could provide cash to improve their quality of life, cover unexpected expenses, and help their families.
“Equity release is more than just a financial transaction; it’s a means of bridging the gap between asset wealth and living standards, ensuring that those who have worked their whole lives to build their assets can finally reap the benefits of their hard work,” Khaitan said.
