Recent research has revealed that a sixth of first-time buyers are entering loan agreements with parents to help them take their first step on the property ladder.
According to Post Office Money, an equivalent of 2.2 million are seeking their parents help to afford their first home, being loaned an average of £24,347. This is slightly less than average amount of £32,101, provided by parents who gift.
Data from the Office for National Statistics revealed that on average, first-time buyers are spending an average of £210, 928 on a property, with £160,442 mortgage advanced. This means that this demographic is using parental funds to pay for around 50% of their deposits.
Whilst this proportion is relatively high, the Post Office research revealed that the majority of parents (83%) do not make a formal agreement with their children, nor do they provide a letter of intent of deed of gift. Just a fifth of families will agree to a structured repayment plan where payments are made monthly.
Of the families who take the time to think about the terms of the agreement, just under half (42%) will look at the child’s household income, with 31% considering the potential growth of this income over time. 29% look at their child’s cost of living.
Commenting on the figures was Owen Woodley. The Managing Director at Post Office Money stated: “The level of support that the UK’s parents want to provide their children is truly heartwarming. High house prices and a challenging cost of living has meant that families have had to increasingly live out of each other’s pockets to make the most of their combined financial capability.
“Indeed, 46% of young people who receive money from their parents anticipate that they will support them financially later in life. Despite this, it’s important for everyone to be clear about the nature of their agreement so that everyone’s expectations are aligned.”
