Despite the removal of stamp duty for (most) first-time buyers, affording that all-important first home remains a challenge. This explains why parents are set to lend a staggering £6.5 billion in 2017 – effectively making the Bank of Mum and Dad the UK's 9th largest mortgage lender.
The estate agents Douglas & Gordon, by combining their own research with figures from various other sources, have found that there were 654,000 first-time buyers between 2015 and 2016, 69% of which wouldn't have managed a deposit without their parents stepping in to offer financial aid. That's a whopping 451,260 people who had to rely on their parents!
Unfortunately, this number is only likely to go up, with property prices continuing to outstrip average wage growth, at 5.1% year-on-year compared to 0.4%. As a result of this continued house price growth, the average house deposit stands at £48,831 – quite a steep figure for anyone eyeing up their first step onto the property ladder.
Whether their kids are looking for a 5% deposit to get a first-time buyer mortgage, or a 20% deposit to be able to get a lower interest rate with a Best Buy fixed term mortgage, parents have found various ways to help. One of the more popular ways to free up the money for a deposit is equity release.
The research found that 22% of parents plan to release the equity from their home to help their kids get on the property ladder. If you're over the age of 55, own your own home and don't want to move, this may be the easiest way to access cash – just remember that it will affect the inheritance your children will be able to receive later on.
Some parents prefer to downsize instead, with 48% of pensioners considering moving to a smaller home. This could be quite lucrative, with an estimated £877 billion available via downsizing by 2036.
What's more, 56% of parents are so generous that they gift the money outright, with 21% providing it as an interest-free loan and 2% offering it as a loan with interest. In the latter two cases, this may affect the affordability of buying a home, which is why parents and their children should clearly state what the terms of the loan are, to help the mortgage provider determine if it's a risk or not.
If you don't have the money and you're not willing or able to take out equity release or move into a smaller house, you could act as your child's guarantor. However, this would make you liable for the repayments and any outstanding debt, so you should give this option careful consideration before diving in.
Consider speaking to an independent adviser to see what your options are
Read our guide on equity release to see if it's for you
Help your children out by pointing them to the Best Buy mortgage deals
Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.