It has been reported that the Bank of Mum and Dad are now the 11th largest mortgage lender in the UK.
Despite this the Bank of Mum and Dad are often stretching themselves too far and this is having a detrimental effect on their financial situation. It is natural to want to help, but you must ensure that you take advice and review your financial plan. Here at Hedges we encourage families to have important conversations, and this can be one of the hardest conversations to have. It can be difficult but it’s important to “break the stigma around money”
Before you decide to help your children to buy a house ensure you take financial advice.
The BoMaD are having to stretch themselves beyond their means to help their offspring. Over a quarter (26%) of this lending group are not confident they have enough to live on in their retirement. The fact that 59% of relatives offer the deposit contribution as a gift rather than a loan is only exacerbating this issue further.
In many cases, the BoMaD are not in a position to use savings to finance their younger relatives home move. 9% are forced to cash in their pensions, 7% use their drawdown pensions and 6% use the annuities, 14% downsized their home.
In many cases, older relatives are also taking on debt themselves to ensure their offspring acquire a property of their own. 6% took out a loan, 4% remortgaged their own home and 16% are taking out equity release finance.