Without the ‘Bank of Family’, a tenth of people would not have purchased at all, according to a report from Legal and General (L&G) and the Centre for Economics and Business Research (Cebr).
This comes as L&G predicts financial gifts from the Bank of Family to support house purchases will reach £9.2bn this year and fund 42% of purchases made by buyers under 55.
The research suggested each buyer received £27,400 on average, the highest amount gifted since L&G’s records began in 2016.
In the future, L&G predicted contributions from family would rise to a total of £11.3bn by 2026, with each buyer receiving £29,943 on average.
Increasing reliance on family help
L&G said financial gifts from family members were becoming more important for homebuyers. Of the 335,000 house purchases supported by the Bank of Family, L&G found 204,000 were funded by parents, 42,000 from grandparents and 88,900 from other family members and friends.
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Some 48% of this came from cash savings, two-fifths from ISA savings and investments, and 12% of gifters used a cash lump sum from their pension savings.
Nearly a fifth of contributors drew on their property wealth to help with a house purchase, while 12% were able to gift money because they downsized. Less than a tenth – 8% – used equity release, while 4% remortgaged or used a combination of methods.
Almost half of family members who gave financial gifts said this made them feel less secure about their own finances, while 11% admitted it negatively affected their standard of living.
Families were found to be helping prospective homebuyers in other ways, too. Some 35% of relatives allow adult family members to live with them rent-free, while a further 39% were open to supporting their adult children in similar ways in the future.
L&G estimated that buyers saved an average of £32,000 when living with family members, which could be used for a deposit.
Purchasers also cutting back
Prospective homebuyers were found to also be adjusting their habits to raise a deposit.
L&G’s research revealed 15% had paused, stopped, or reduced pension payments or never paid into a pension so they could raise a deposit for a home. This rose to 19% among first-time buyers.
L&G said this was potentially affecting the retirement of younger people, as it calculated that pausing pension contributions for just one year at the age of 30 could reduce a pension pot by £8,068. A four-year pause could see a £31,868 reduction to a person’s pension savings.
Bernie Hickman, CEO of L&G Retail, said: “This research shows that families across the generations are facing tough decisions as they try to balance the aspirations of today with the needs of tomorrow. We need to look at what could help all generations achieve better financial security, enabling them to build savings and assets today, and sustain their financial adequacy through their later years too. Almost a quarter of families are using property wealth to help younger generations onto the property ladder, but this option isn’t available for everyone.
“When people are making difficult and complex choices like these, understanding all the options, and what the long-term impact of choices might be, is really vital. We and other providers have lots of education tools and resources available, such as our Guide to Gifting, and our podcast, A Little Bit Richer, which is aimed at a younger audience. This is also where getting professional advice can be very valuable; an adviser can help you understand all your options.”
This article was first published on YourMoney.com‘s sister site, Mortgage Solutions. Read: A fifth would delay house purchase without family help – L&G
