Giving children a helping hand onto the property ladder

Giving children a helping hand onto the property ladderA goal we often hear from our clients when constructing their Financial Plans is giving children a helping hand onto the property ladder.

Buying your first home is an expensive business.

Soaring property prices in recent decades have resulted in homes which are unaffordable for many, without financial support from generous parents.

This often means adult children are forced to rent rather than buy, until the bank of mum and dad kindly steps in.

New research in the form of the Halifax Generation Rent Report has found a wide disconnect between prospective first-time buyers and their parents with regards to their perception of the first-time buyer market.

According to the research, just 12% of parents believe it is ‘virtually impossible for first-time buyers to obtain a mortgage’.

This rises to 21% of prospective first-time buyers.

The Generation Rent Report contains data from interviews with over 40,000 20-45 year olds built up over five years, and over 4,000 parents of 20-45 year olds over the last four years.

In recent years, the report shown parents and Generation Renters were both more pessimistic about the first-time buyer market; 21% of parents and 29% of prospective first-time buyers said it was virtually impossible three years ago in 2012.

However, with improving economic conditions and an increasing number of first-time buyers since then, both parents and prospective first-time buyers have become more optimistic.

But more than a fifth of Generation Renters still believe it’s virtually impossible to get onto the property latter.

First-time buyers moving back in with Mum and Dad is a growing issue. In 2015, 28% of parents said their children moved back to their family home, up from 24% in 2012.

The report found that direct parental contributions towards the costs of a mortgage have remained steady.

A parental contribution towards a deposit stayed the single largest type of contribution. The only increase in the last four years has been those helping with the actual costs of moving house.

If you’re thinking about giving your children a helping hand onto the property ladder, it’s important to factor this generosity into your Financial Plan.

Consider the impact it might have on your own lifestyle in retirement before parting with the cash.

You should also think about any inheritance tax implications of making the gift, and indeed whether to structure it as a gift or investment.

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