Nearly half of 18-24 year olds, 37% of 25-34 year olds, 35% of 35-44 year olds, 30% of 45-54 year olds and 26% of those aged 55 and over expected to provide financial support to their children over the course of their life.
Around a quarter felt they would never be able to stop providing financial support to their children, with a deposit on a property by far the largest of the expenses they would encounter.
Figures from the Council of Mortgage Lenders revealed that parents assisted 84% of purchases for first-time buyers below the age of 30.
The National Housing Federation also claimed the average age of a first-time buyer is now 37 years of age.
Ben Thompson, managing director of L&G mortgage club, said: “The effort by the Bank of Mum & Dad to breathe life into the first-time buyers sector of the housing market has been nothing short of Herculean.
“In many ways the Bank of Mum & Dad has been one of the most active lenders out there and proven to be a lifeline for first-time buyers up and down the country as it makes up for the shortfall in traditional lending.
Thompson however said that such a consistent level of “lending” was not sustainable especially after considering the ageing population and the generally poor provision of retirement saving in this country.
He said: “In many ways these parents are robbing Peter to pay Paul and as the financial strain increases on all of us it may not be too long before the Bank of Mum & Dad reaches its breaking point leaving not only a huge gap in retirement provision but also leaving an already depressed first-time buyer sector even more in the mire.
“We as an industry and the government must do all we can to support the Bank of Mum & Dad as it has become an important pillar in the current UK housing market and therefore is crucial to our economy.”
Thompson provided eight suggestions for parents to help resolve the issue.
These included providing guarantor mortgages, gifting a deposit, a Lifetime Gift or Potentially Exempt Transfer, offset mortgages linked to parent’s savings, remortgaging, purchasing a buy-to-let property and using a junior ISA.
A Lifetime Gift or Potentially Exempt Transfer is where an inheritance is essentially brought forward.
Any gifts made to individuals will be exempt from Inheritance Tax as long as the benefactor lives for seven years after making the gift.
Thompson said on offset products: “The attraction of an offset product is that every month an amount equal to the gross interest parents would have earned on savings is credited to their child’s mortgage account.
“Offsetting also reduces the interest paid by the borrower and as a result the mortgage balance can be reduced over the long-term.”
Remortgaging to raise cash for a deposit would have a net result of an increased mortgage term to absorb the additional borrowing required for a child’s home.
Thompson said: “It’s vital therefore that the industry does its best to provide innovative and inclusive products that help reliable first-time borrowers to realise their dreams of home ownership and lessen the load on well meaning parents.
“Without a flow of new lending we could end up with a sizeable financial hole in the centre of middle England which may create even bigger problems further along the line.”
