Bank of mum and dad and the implications for over-55 equity release
24 July 2019
How intergenerational lending is changing
As more and more people are living longer, how wealth is passed between generations is changing. With men in the UK expecting to live on average to just under 80 years, and women enjoying an average life expectancy of 82.9 years2, the age at which most people can expect to inherit from their parents is now often no longer at a time when it would be most financially helpful.
More and more people are therefore choosing to help out younger generations while they are still alive. The study by Legal & General and the CEBR shows that the older generations are on average lending more than £24,000 to their children and grandchildren, with the average contribution for this year increasing to £24,100 – over £6,000 more than 2018’s average contribution of £18,000.
This supports figures from the Equity Release Council LINK, which show that gifting to friends and family is becoming an increasingly popular reason for over 55 equity release schemes. 27% of equity release schemes taken out in 2018 were to help friends and family3, up from 24% in 20174.
Supporting your children: how over-55 equity release can help
“We know that one of the primary reasons our customers turn to us is to draw down funds that they can then pass on to their children and grandchildren when they need them most,” commented Jan Johnson, director of 55+ Equity Release. “Legal & General’s figures show total lending by the so-called ‘Bank of Mum and Dad’ has increased by 10% this year, with it now the 11th largest mortgage lender in the UK1. There may be fewer sales, but nearly one in five transactions in the UK mortgage market was funded via parental support.”
Not just for young would-be home owners
What’s particularly interesting is that this year’s figures suggest that the Bank of Mum and Dad is playing a more complex role in the housing market than previously thought, with the Bank of Mum and Dad helping more than just young first-time buyers:
- Millennials (those aged 35 and under) continue to rely on mum and dad the most, with 62% needing financial support from their parents or other family members and friends.
- More than a fifth of people aged 45 – 54 have received financial assistance from family or friends to purchase their latest property.
- Around 7% of over-55s have also received help from family or friends to buy their most recent home. This support for older buyers is expected to double, with 14% of Britain’s over-55s expecting assistance from Bank of Mum and Dad for a future house purchase.
Expert advice is essential
“It’s clear, given the current property market, Bank of Mum and Dad is only going to grow. If you are considering using equity release as a means of helping your children or grandchildren – whether they’re in their 20s or in their 50s – to get a foot on the property ladder, it pays to speak to experts,” advises Jan Johnson.
The team at 55+ Equity Release can talk you through the pros and cons of any option, making sure everyone involved understands all the implications, both practical and financial. With expert help, you stand the best possible chance of coming up with a plan that meets the specific needs of you and your children.
1https://www.legalandgeneralgroup.com/media-centre/press-releases/bank-of-mum-and-dad-digs-deeper-as-average-contribution-rises-by-6 – 000/
3 Equity Release Market Monitor, Full year 2018
4 Equity Release Market Monitor, Full year 2017