personal finance

Growing strain on the bank of mum and dad


Family members are helping out with one in four property transactions, as workers in many essential jobs earn so little it would take them more than 100 years to save enough to buy a property. They are also spending more than £2billion a year just to keep their offspring on the road.

The burden on parents is on the rise with the “bank of mum and dad” £18,000 worse off on average for supporting children and some having to downsize or retire later, L&G research shows.

Lifetime job

Workers in many essential jobs would take more than 130 years to save enough money needed to buy the average UK property.

Full-time bar staff on a typical £14,390 salary could get a maximum mortgage of just £57,560, based on four times their salary.

With the average house costing £226,351, according to the Land Registry, buyers would need a deposit of £168,791 to make up the shortfall.

Hairdressers, barbers, waiting staff, florists, checkout operators, catering workers, nursery staff, beauticians, cleaners and others would take more than a century to save enough, even banking 10 per cent of their income.

Chief executive of online estate agent HouseSimple.com Sam Mitchell said: “This is a stark picture of the struggle facing many buyers in low-paying but essential jobs.”

The Government has launched a number of schemes such as Help to Buy, Right to Buy, Shared Ownership and Lifetime Isas, but more needs to be done to help lower earners, he added.

The family way

Parents and grandparents keen to help younger family members onto the property ladder are being urged to protect their own financial position and to consider alternatives to simply handing over a cash lump sum.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, explained one option is to act as a guarantor on their mortgage: “However, if your child cannot pay the mortgage you will have to step in, which could put your own home at risk.”

Coles added that a specialist family mortgage such as Barclays Family Springboard could be a safer option, where parents and grandparents put down a 10 per cent property deposit in the shape of a loan.

“If the children meet all the mortgage payments for the first three years then you will get your loan back in full with interest on top,” she said.

A family offset mortgage allows relatives to put savings into an account linked to a young buyer’s home loan, to cut any interest payments or shorten the term.

“This offers more flexibility for parents and doesn’t leave them open to a liability if their offspring can’t pay the mortgage,” she said.

Home again 

Coles added another option is to let the kids live at home and put the savings on rent into a Lifetime Isa: “They can pay in £4,000 a year and the Government will top it up to £5,000.”

This would give them a 5 per cent deposit for a £200,000 home within two years, or one if buying with a partner or friend.

“They can use the Help to Buy equity loan scheme to cover the rest, and move out for good.”

In a jam

Four out of 10 young drivers aged 17 to 24 had financial help from their parents to buy a car, receiving an average of £2,201.

More than half also get help towards their running costs, such as insurance, fuel, vehicle tax and repairs, with help averaging out at £763 a year.

In many cases this is essential if children are to get to work and earn an income, according to the latest research from CompareTheMarket.com.

Commercial director Simon McCulloch said without parental support to run a vehicle young people’s careers would suffer: “This provides a vivid insight into the impact of spiralling costs on social mobility.”



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