Research from Legal & General has shown that parents gifting their children gifted deposits now more than in any recent years. In fact, if the “bank of Mum & Dad” was actually a bank it would be one of the top 10 biggest lenders in the UK.
Parental gifted deposits in the UK most commonly appear to range around £24,000. Gifts are also received from extended family members, including grandparents, as their wealth sometimes skips a generation.
It would seem that thousands of home buyers every year are only able to get their foot on the housing ladder because of help and financial support from their families. It’s mostly First Time Buyers that make up most of these percentages but even so, without these gifts, the market would be very different from how we know it.
According to the survey, almost 20% of parents who choose to help their children financially did so out of a feeling of obligation from parental responsibility.
Property prices have over-extended in comparison to wages over the recent years, putting the chance to purchase a first home on hold for many, especially if there is only one level of supporting income contributing to potential future savings.
Rent also damages a person’s ability to save for their own deposit. This is sometimes the reason as to why some individuals choose the safer option and move back in with their parents for a while, to help with saving and get them on the right track to secure a home.
But this generosity from family members could foresee a possible backlash and could affect the parent’s quality of living in retirement. Based on their survey of 1600 parents who had helped out their children, most gifted deposits were withdrawn from their own savings and pension schemes. Overall, it seems this is just an early inheritance where beforehand the parents help and advise where it’s spent.