First Time Buyers Turning to Grandparents for Help.

by Mark Johnston

First time buyers turning to grandparents for help.

In 1983 the average first time buyer paid less than £21,000 for their home, however the equivalent today is nearly 7 times higher at approx £137,000, according to Nationwide building society.

Therefore grandparents who bought their homes in the 80s or earlier appear to have profited from decades of rising house prices. Aviva, Britain’s biggest insurer, have carried out recent research which shows that around 8 in 10 people aged over 55 now own their property outright.

It seems that many parents are now unable to help out their children financially having seen their own finances squeezed by high living costs, deteriorating employment conditions and a lack of real returns on savings.

According to a study some 65% of parents said that they did not have any spare funds to help their children and nearly a quarter admitted they were struggling to keep afloat themselves.

A report by house builder Taylor Wimpey found that currently 1 in 10 young adults were now therefore turning to their grandparents to help them with a deposit to enable them to get a foot on to the property ladder.

The equity release group, Safe Home Income Plans (SHIP) suggests that while the bank of mum and dad may not have enough cash to help younger family members on to the property ladder, many older relatives could do so and this would also help to reduce their inheritance tax (IHT) liabilities.

Dr. Ros Altman, Saga’s director general, was blunt about this particular issue when she added that “the elderly are living longer and their grandchildren therefore have to wait longer for their inheritance as a result”.

The director general of Safe Home Income Plans (SHIP) also added “with wealth locked up in bricks and mortar, one thing is certain; they can not take it with them. They could well help their grandchildren by releasing a lump sum from their property, providing funds for a first time buyer deposit, while using the rest to supplement a retirement income for them”.

In light of this train of thought, equity release schemes are growing in popularity, the sale of equity release products has soared in the 6 months from January to June this year.

The equity release council reported that people over 55 have taken equity worth £225 million from their homes. It also showed that much of this amount was used to enable grandchildren to get on to the property ladder.

This particular figure covers the period from April to June 2012 and it marks a 22% rise on the same period in 2011. It is also the highest quarterly figure since the end of 2009.

There have however been concerns raised about grandparents helping out in this way as many of them who do enter in to these schemes are not fully aware of the process or how exactly it works.

The Consumer Credit Service (CCS) has also advised the elderly to consider their own futures and the potential issues involved before they enter in to any of these schemes.

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