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UK homeowners use property wealth to help first-time buyers

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property ladder blog

By Clare Yates • 4th October 2024 • 4.5 min read

Gifting from property wealth in the headlines

Written in line with our editorial policy.

Family contributions often play an essential role in helping home buyers get onto – or move up – the property ladder. New research confirms that accessing existing property wealth is a popular way to do this.

According to new research, 19% (almost 1 in 5) of the parents and grandparents providing this financial support are turning to their own property wealth to manage it.

Help from the ‘Bank of Family’

Legal & General and the Centre for Economics and Business Research found that the ‘Bank of Family’ is expected to help fund 42% of property purchases made by people under the age of 55 throughout 2024. It equates to around 335,000 housing transactions—the highest number of family-supported purchases since L&G began tracking this data in 2016.

This financial assistance is set to grow even further, with gifting from parents and grandparents predicted to hit £11.3 billion by 2026. 

So how are older generations finding the money to provide all this support? Many are using their own property wealth, via downsizing, remortgaging or equity release

Gifting has long been a popular reason for arranging equity release, often to help loved ones get onto the property ladder. Legal & General say that 9% of its customers turning to this form of later life lending in the first half of 2024 did so in order to gift money to someone.

Not enough homeowners seeking advice

While homeowners using equity release are required to seek professional equity release advice as part of the process, the L&G research found that 74% of parents and grandparents who sourced their money through other means did not seek financial advice first. This lack of guidance could have significant long-term impacts on their finances.

Lorna Shah, Managing Director of Retail Retirement at Legal & General, emphasises the importance of seeking professional advice: “Although products like lifetime mortgages are always supported by specialist financial advice, it’s important that anyone making a significant gift seeks help from a financial adviser, even if their property isn’t the source of their funds.”

Options for using property wealth to help loved ones

According to property agents Savills in an article by This Is Money, parents are predicted to pay out almost £30 billion over the next three years to give their children a hand up the property ladder. In 2023 alone, £9.4 billion was handed to first-time buyers due to higher mortgage rates. 

In total, 164,000 first-time buyers had financial help from family members to buy their first home last year. It equates to over half (57%) of all first-time buyers who took out mortgages. 

While many parents and grandparents choose to use savings or investments, property wealth is clearly also a popular option for providing this financial help.

If you are thinking about helping out your own children or grandchildren, then downsizing might be a good first option to consider. This not only releases equity but can also reduce the costs of maintaining a larger property, freeing up more disposable income for yourself. 

Equity release, however, enables you to remain in your home, typically without any monthly repayments to make, and may provide larger sums of money than downsizing. That said, it’s essential to understand its long-term implications, such as how the loan plus interest will reduce the value of your estate.

Lorna Shah said in the report by L&G: “As equity release moves more into the mainstream, more people are likely to turn to it for help. The ‘Bank of Family’ is predicted to have a busier year than ever, so we might see more people drawing equity from their property to support their loved ones.”

Remortgaging is another option for parents and grandparents looking to support first-time buyers. By switching to a new mortgage deal, older homeowners can release equity from their home without having to downsize or move to a less expensive area. 

However, this option may involve extending the mortgage term or increasing the loan amount to access additional funds. It’s therefore crucial to carefully consider the terms and impact on long-term financial security, particularly if retirement is on the horizon. Consulting with a mortgage adviser can help ensure the decision aligns with both current needs and future plans.

Property wealth will no doubt continue to be a crucial resource for older generations wanting to support younger family members in today’s challenging housing market. However, any decision to access some of your equity for this purpose should be made carefully – with professional advice – to ensure the financial future of both you and your loved ones is protected.

What is equity release?

A popular option for gifting money to loved ones, equity release allows homeowners aged 55 and over to unlock some of the value tied up in their property while still living in it. This can be done through a lifetime mortgage, where you borrow money against your home, or a home reversion plan, where you sell a portion of your property. 

Neither option requires you to make any mandatory monthly repayments. Instead, your house is usually sold when you pass away or move into long-term care, with the money used to repay your loan and the accrued interest.

If you do consider equity release, it’s important to seek proper advice. Our selected advisers will provide all the regulated advice you need, in addition to checking your eligibility and explaining all the pros and cons, such as the implications of gifting money to family members. Gifting could mean tax consequences, so it’s important you are fully informed before making any decisions.

Please call 0800 096 2215, or request a call back for a time that suits you, and we will arrange a call with one of our selected advisers. Alternatively, you can use our free equity release calculator to see how much you could unlock. 

All the advice and quotations you receive (at the latest equity release rates) will be given free of charge. You’ll only pay a fee for advice if you choose to go ahead with a plan, and you can typically pay this from the money you release from your home.

About Clare Yates. With over a decade’s experience writing about later life financial planning, Clare offers a wealth of knowledge about equity release, pension annuities, wills, LPAs and more. When she isn’t writing, Clare likes to spend her time baking and going on walks with her husband, two children and their rescue dog. Follow Clare on LinkedIn

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