Getting onto the property ladder has become an increasingly difficult challenge for young adults.   

Rising property prices and areas where affordability long ago went beyond reach, means turning to the Bank of Mum and Dad for financial support is necessary. 

New research suggests that older homeowners are stepping up to this challenge, providing the funding for their adult children to buy a property.  Equity release adviser Key found that retired homeowners are finding capital in a variety of ways, including selling their buy-to-let property investments, acting as a guarantor on a mortgage, or taking on new mortgages. 

Releasing cash in these ways is in addition to using cash savings, something 95% of retired parents have done when supporting property purchases for their children.  Around a fifth of older parents who acted as the Bank of Mum and Dad used monies from their pension funds as a source of capital. 

The research, which spoke to 150 mortgage advisers, found that 19% have received enquiries from older customers about selling buy-to-let investments or holiday homes.  Nearly a third of older customers asked about acting as a guarantor, to help secure the mortgage required by their children or grandchildren. 

Also, 28% made enquiries about remortgaging to release capital, and 21% to take out a new mortgage. 

It’s estimated that nearly half of first-time buyers are tapping into the Bank of Mum and Dad for financial support.  Other research published recently showed that parental support would be in the top ten largest lenders in the UK if it were a real bank.  

Data from industry body UK Finance shows that the average first-time buyer in Scotland is 29 years old and has a household income of £35,000.  In London, the average first-time buyer is 32 years old and has an average household income of £68,000. 

Looking at the national picture, the average age of a first-time buyer is 30.  They have a loan-to-value of 85%, with a mortgage of £145,000.  This means the average first-time buyer in the UK needs a deposit of £25,600. 

Of course, it’s not just first-time buyers who need a helping hand.  Home movers who move from their existing property to a larger or more expensive home are often turning to parents too.  Advisers estimate that 24% of those moving to their next home are receiving parental support. 

If you’re considering giving your children or grandchildren a helping hand on the property ladder, keep in mind the need to secure your financial future first.   

By constructing a comprehensive wealth plan, it’s possible to model the likely outcome of different gifting or lending scenarios.  

Wells Gibson delivers Proper Wealth Planning which has financial forecasting at its core as this is the most prudent way to prevent giving away too much; money that you might need later in life.