Queen Elizabeth II 1926 - 2022

If you’re a parent, you’ll be all too familiar with the money vacuum that is also known as your children.

From forking out for nappies and baby food, to coughing up for football training and dance recitals (not to mention the endless need for petrol to fill up your ‘taxi’), you’d think your kids would stop being a financial drain on you as soon as they grew up.

Unfortunately, this isn’t the case. As a wealth management expert, I’ve observed a significant trend in the property market, which is the rising importance of the ‘bank of mum and dad’.

This phenomenon has become a cornerstone for many first-time buyers navigating the challenging property landscape.

My insights, drawn from recent Institute of Fiscal Studies (IFS) research, highlight that an astonishing half of first-time buyers now lean on their parents for financial assistance to muster deposits for their homes.

This trend isn’t just a mere statistic; it’s a reflection of the evolving dynamics in property acquisition.

Consider the figures: on average, parents contribute about £25,000, a number that escalates to around £35,000 for offspring of university-educated parents. This financial backing has become a lifeline in an era of fluctuating house prices and mortgage rates.

Interestingly, we’ve seen a slight easing with mortgage rates dipping below six per cent for two-year fixed rates.

The geographical factor plays a crucial role too. In the southeast of England, the average parental contribution stands at £31,000, significantly higher than the £18,000 in the Midlands or £17,000 in the north.

Yet, it’s worth noting that only 29 per cent of first-time buyers with renting parents receive help, averaging a modest £11,000.

The impact of this parental support is huge. Each £1,000 gifted can amplify a buyer’s purchasing power by £10,000, assuming a 10 per cent deposit.

This often escalates to a 25 per cent deposit, leading to more favourable mortgage rates and manageable monthly payments.

As parents, we will always be there to support our children, no matter their age. With this in mind, several strategies can be employed. These include regular savings plans, stocks and shares ISAs, property investments, and gifts and loans.

The growing dependency on parental support just shows the hurdles faced by first-time buyers today.

While this assistance is invaluable, it’s essential for both parties to fully grasp the financial implications and explore diverse savings and investment avenues.

For tailored advice on savings and investment strategies to empower first-time buyers in stepping onto the property ladder, I invite you to connect with us. Contact us today for more information.