Financial support from family members has become increasingly crucial for individuals looking to purchase property in the UK. According to recent research by Legal & General, an estimated 318,400 homes will be purchased this year with assistance from the “Bank of Family.”

This figure is the highest since 2016 and highlights the challenges faced by aspiring buyers without access to this support. As first-time buyers struggle to enter the property market, family contributions are expected to reach a staggering £10 billion by 2025. This article will explore the growing reliance on family support, its impact on different buyer segments, and the wider implications for the property market.

Research

The average amount provided by relatives for property purchases is expected to reach £25,600 this year. In total, properties purchased with assistance from family members are predicted to have a value of £124.6 billion. The research indicates that without financial help from loved ones, the majority of recent or prospective buyers would have to delay their home purchase. Approximately 21% state that they would need to delay their purchase by more than five years, and 10% of first-time buyers would not be able to buy a home without assistance from the “Bank of Family.”

Younger buyers and first-time buyers are the most reliant on direct financial support and often cannot purchase a home without it. By 2023, Legal & General estimates that the “Bank of Family” will provide support to nearly half (47%) of residential property purchasers under the age of 55. Moreover, 58% of the financial support from family members currently goes to first-time buyers. These groups typically struggle to save the necessary deposit due to rising house prices and stagnant wages.

Legal & General’s research reveals that 77% of buyers receiving family assistance allocate a portion of the funding towards a deposit. This comes as no surprise given that average household savings have not kept pace with the significant increases in deposit requirements caused by rising house prices. Families not only provide monetary aid but also offer indirect financial support to help loved ones boost their savings. For instance, 31% of parents and grandparents have welcomed adult family members to live with them, allowing them to save for a deposit. Additionally, 37% of respondents would be willing to house their adult children in the future. On average, buyers save £24,900 when living with family members, which can be put towards their deposit. However, this support creates a gap between those with family wealth and those without, exacerbating inequalities in homeownership.

Bernie Hickman, CEO of Legal & General Retail, emphasises that an increasing reliance on family assistance poses financial strain on the givers, who may compromise their own retirement incomes by drawing from savings and pensions. This highlights the potential risks associated with a housing system heavily dependent on gifted deposits, perpetuating inequality.

The report reveals regional variations in family lending and gifting patterns, reflecting differences in house prices, affordability, income levels, and wealth inequality across the UK. The ongoing impact of the pandemic and the cost-of-living crisis also contribute to the rising trend of “Bank of Family” lending. Legal & General’s Deadline to Breadline report highlights that high levels of inflation have left one in three households with less than £500 after basic outgoings each month, and 6% of households have no disposable income.

Conclusion

The increasing reliance on financial support from family members has become a vital factor for individuals aiming to enter the property market, especially for younger buyers and first-time buyers. The “Bank of Family” is projected to assist in the purchase of 318,400 homes this year, the highest number since 2016. However, this growing trend raises concerns about the wider implications for homeownership inequality and the strain placed on givers. While gifting a deposit is a kind gesture, it should not be an essential part of the homebuying process, indicating a need for policy changes and increased affordability in the housing market.