According to research from Legal & General, parents are gifting deposits for their children now more than ever before. In fact, they gift so much now that it the “Bank of Mum & Dad” was actually a bank it would be one of the top 10 biggest lenders in the UK.
Gifted Deposits and the Property Market
Thousands of homebuyers every year are reliant on their families to either get onto the housing ladder in the first place, or upgrade to a larger home. In fact, if these gifts were not allowable or available the market in general could be in serious trouble.
According to the survey, almost 20% of parents who had helped their children buy did it for the reason that they felt it was their personal responsibility to help out.
Property price rises have outstripped wage increases over the years, putting purchasing a first home out of reach for many, especially if there is only one income coming into the household. Paying out for rent eats into people’s ability to save for their own deposit. Some move back in with their parents for a while in the run up to moving to help with saving.
How Generous is too Generous?
Off the back of the survey, Legal and General warned that parents' generosity could hurt their standard of living in retirement. The average parental gifted deposit in the UK is now up to £24,000. Gifts also come from other family members, including grandparents, as their wealth sometimes skips a generation.
Based on their survey of 1600 parents who had helped out their children, most were gifting from their own savings. Slightly more worrying though was that many were withdrawing from their pension schemes or their own equity. Effectively this is them “fast-forwarding” their child’s inheritance.