Parents' Financial Sacrifices: The Rising Trend of Property Deposit Gifts
UK parents increasingly assist their children with property purchases, using various financial methods. This trend reflects the growing gap between wages and house prices, with 42% of under-55 buyers receiving family help in 2024.
In the UK, a growing number of parents are making financial sacrifices to help their children enter the property market. This trend, known as the Bank of Mum and Dad (Bomad), has reached unprecedented levels, with Legal & General research indicating that 42% of properties purchased by individuals under 55 in 2024 will involve family assistance.
The case of seven-year-old Oliver Mitchell exemplifies this trend. His parents, Katie and Chris Mitchell, have been saving his child benefit since birth, accumulating over £8,000 in a Junior ISA. They hope this sum will contribute to a future property deposit for Oliver.
"We were both in the military and earning good money, and we didn't really need our child benefit money, so we decided to save it for him."
This approach aligns with the fact that child benefit in the UK can be received until the child is 20 if they remain in education or training, potentially accumulating to around £19,000.
The motivation behind this parental assistance is clear. According to the Office for National Statistics, the average full-time employee in England requires 8.3 times their annual salary (£35,100) to purchase an average home (£290,000). This ratio is even higher in cities like London, Bristol, and Cambridge.
Families employ various methods to raise funds for property deposits:
- Downsizing (20% of cases)
- Using pension pots (accessible from age 55)
- Utilizing savings and investments
- Equity release (12% of cases)
However, this generosity often comes at a personal cost, with 17% of over-55s experiencing a reduced standard of living after assisting their children.
The Winton family illustrates this trend. Ian and Natalie Winton helped their son Austin purchase a 25% share of a £500,000 flat in North Acton through a shared ownership scheme. They provided a £25,000 deposit, potentially extending their own mortgage term.
"Why wouldn't we? I wanted to help both of them as much as I could, rather than for them to wait until I die to get an inheritance."
Similarly, Rick and Linda Denton gifted £325,000 to each of their children for property purchases in London. This decision was part of their inheritance planning, taking advantage of the seven-year rule for inheritance tax exemption.
While parents' motivations include helping their children and potential tax benefits, the recipients often have mixed feelings. Gratitude is common, but some experience shame about relying on parental support and discomfort when discussing it with peers.
As house prices continue to outpace wage growth, the Bank of Mum and Dad phenomenon is likely to persist, with family financial assistance for property purchases expected to reach £11.3 billion by 2026.
