New analysis and research by Legal and General shows that money supplied for house purchases by family members now amounts to £5billion annually.
The research has revealed that the Bank of Mum and Dad will give an average amount of £17,500, or 6.9% of the purchase price, to 305,900 loved ones to help buy a home in 2016, funding the purchase of £77bn worth of property.
This puts the Bank of Mum and Dad in the top ten mortgage lenders in the UK – and it offers lenders very generous deals according to the research!
More than half of the money comes as a gift (57%), and where it is lent, the loans have long repayment periods and rarely charge interest.
Parental help towards home ownership has become a necessity for many first-time buyers, with a quarter of all home owners, and over half of under-35s (57%), receiving funding from family or friends.
This is said to be a direct consequence of house price inflation that has far outstripped zero real wage growth. Pay has risen by 1.5% annually since the financial crisis, but the average UK house price in England hit £306,000 at the end of January 2016 – up 8.6% from the year before.
On the other hand, recent decades have been kind to us ‘baby boomers’ who now control the lion’s share of the nation’s wealth. Many of us have benefitted from the increase in the value of our homes, with good pensions and significant savings.
It is not just mortgages that parents are helping with though – weddings, car loans, business loans, postgraduate degrees, even school fees for grandchildren are common reasons for many of us financially assisting our children well into retirement.
Over 55’s wanting to give loved ones help to get on – or up – the ladder may wish to consider some of the varied and flexible retirement income options available today.
From the age of 55, savers can tap into the 25% tax-free cash available from our defined contribution pension funds to spend however we choose, without the need to take retirement straight away.
One retirement income option which allows access to the tax-free cash in our pension funds – without investment risk – is a Fixed Term Annuity. This is typically set for a few years, say, five or six. At the outset, a tax-free cash sum can be taken, together with as much income as is required, or none at all if an income in not required at this time (thus minimising additional tax).
A guaranteed amount is payable at the end of the term which can be taken as you wish (typically reinvested in a lifetime annuity, or another fixed term annuity). This option is useful for those of us who want to keep our options open for the future.
When it comes to finding out which retirement income options could meet your current and future needs, speaking to a specialist in retirement income is essential. Call 0800 652 1316 to discuss your options and to receive your FREE retirement options report.
Retirement Line work on a non-advised basis. If you are at all unsure of which options suit you, you should seek regulated advice.