According to research from Legal & General, more parents are gifting deposit than ever before. Statistically, if the “Bank of Mum & Dad” was a physical bank as opposed to a given term, they would likely be within the top 10 biggest lenders in the United Kingdom. On average, parents are now gifting amounts nearing £24,000. Sometimes these can come other family members, such as grandparents. Instead of passing on their savings to their children, they may opt to skip a generation and give it to you instead.
Thousands become reliant on a family member every year, hoping they can help them onto the property ladder (or upgrade to a home that is larger). In truth if gifted deposits were not allowed, the mortgage market would be in a bad way. Luckily, I don’t think we’ve seen the last of them just yet.
According to the survey undertaken by Legal & General, around 20% of parents who had helped their children with home buying, did so because they felt a sense of personal responsibility to help out their child. Over the years, property prices have gone beyond the average wage, leaving many unable to save for the deposit on their first home. This becomes especially apparent if there is only one income supporting the household.
Whilst renting may seem useful in the short term, in the long run it can harm any chance people have to save for a mortgage deposit. Some even go as far as moving back in with their parents to help save up the necessary costs.
Parental generosity could harm their living standards in retirement too, the survey showed. Surveying 1600 parents who had helped their children out, many went on record as saying they had used their own savings to do so. Another concern is that some said they had been withdrawing from their own pension schemes or equity in order to gift a deposit. Essentially, this is them putting forward any inheritance their child would receive.
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