A new report by Legal & General (L&G) shows financial gifts are set to exceed £9bn this year, as buyers boost their deposits to offset high mortgage rates.
Read on to find out how the 'Bank of Family' is impacting house purchases, and for advice on alternative ways you can help your child buy their first home.
Buyers gifted an average of £27,000 by family members
L&G's new 'Bank of Family' report forecasts that gifted money from family members will contribute to 335,000 house purchases this year.
In total, family members are expected to hand out £9.2bn to help fund purchases, up from £8.1bn last year. L&G estimates gifting will rise to £11.3bn by 2026.
Find out more:Families fund gifts from savings and property wealth
L&G's research found that financial gifts from parents are most common, helping to fund 61% of purchases.
Gifts from grandparents (13%) and other family members (26%) made up the remainder.
The impact of gifted funds
L&G's survey found that the majority of recent or prospective first-time buyers said they would have to delay their purchase if they didn't get financial support.
One in five buyers said they'd have to wait at least five years, while one in 10 said they wouldn't be able to buy at all without help.
Find out more:Where do buyers get the most help?
However, the largest gifts were in the South West (£32,900), South East (£31,300) and East of England (£31,000).
L&G estimates that by 2026, the average family contribution towards a house deposit will have increased from £27,400 to £29,900.
Homebuyers are prioritising property over pension
When it comes to saving a deposit, some prospective buyers are cutting back on other expenditure.
This isn't necessarily a good move. L&G says even temporary pauses in pension contributions can have a significant impact on saving for later life.
It calculated that a 30-year-old pausing their contributions for one year could end up with £8,000 less in their pension pot.
Alternative ways to help a first-time buyer
While gifting money is one way to help your child or family member buy a home, it's by no means the only option.
Many people simply won't be able to offer this kind of financial help, and it's important not to stretch your finances too far.
L&G found that 49% of people who provided financial support felt less secure about their own financial position afterwards.
Most worryingly, a further one in 10 said gifting money had negatively impacted their standard of living.
1. Take your child in
This might not be for everyone, but one alternative is to let your child move back in with you for the short term while they save a deposit.
More than a third of relatives surveyed by L&G said they had welcomed adult family members back home rent-free.
L&G estimates that buyers can save an average of £32,600 while living with family members.
2. Loan money
Loaning money can be an alternative to gifting, but it's important to set out clear rules, including a repayment plan and whether you'll be charging interest.
3. Consider a guarantor mortgage
Guarantor mortgages enable parents to use their savings or property as security for their child's mortgage application.
By doing this, you can reduce your child's risk profile with lenders, making it easier for them to get accepted. Putting up your savings as security can also reduce the deposit your child will need for a mortgage.
4. Buy a property together
Another alternative is to buy a property with your child using a joint mortgage. This allows you to use your income and savings to help them onto the property ladder.
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Other financial services:
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source https://www.which.co.uk/news/article/gifted-deposits-hit-record-levels-how-to-help-your-child-buy-their-first-home-anSr48H4dTpz