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Parents and grandparents are facing a retirement cash crunch as they prepare to contribute a record £8.1bn towards younger buyers’ house purchases this year, a report has warned.
Money from relatives will help fund close to half of all purchases by under-55s in 2023, according to research by Legal & General and the Centre for Economics and Business Research (Cebr).
It is a significant jump from 35pc in 2020, when the research was last carried out. For under-35s, the share is expected to jump from just under half in 2020 to 57pc this year as rising interest rates push up mortgage payments.
The Bank of England has raised interest rates 14 consecutive times since December 2021 to 5.25pc, wiping tens of thousands of pounds off what the average borrower can afford.
The average amount of financial support from relatives is expected to hit £25,600 this year, L&G’s research found.
Bernie Hickman, chief executive of Legal & General Retail, which has 12 million policyholders, warned the record sums put many older people at risk of running out of money later in life.
He said: “Our research clearly shows that gifting or lending money to loved ones to get on the property ladder has noticeably impacted [the givers’] finances.
“There’s clearly a risk of depleting their own financial resources to the extent that it could impact on their own ability to live comfortably.”
Collectively, gifted funds towards home deposits are predicted to reach £10bn by 2025, nearly twice as much as in 2016.
Many of L&G’s customers have released equity from their property through lifetime mortgages to help their children or grandchildren get on the property ladder, Mr Hickman said.
He added that Britain’s housing market was not only perpetuating inequalities but was also creating “risks for the older generations”.
Research by L&G found that seven in ten people who had given money towards a family member’s home said it had left them in a worse financial position.
Steve Webb, a former pensions minister, said: “The big risk for parents on a tighter budget is that they might under-estimate their own retirement needs.
“It is important to have both regular income and a certain amount of capital. You might think that you can live comfortably enough from week to week, but what happens when the car needs replacing or the boiler breaks?”
Even among buyers aged 45 to 54, one in four relied on funds gifted by family to afford their purchase, L&G found.
Aneisha Beveridge at Hamptons, an estate agent, said rapidly rising borrowing costs would pile more pressure on family members to provide financial support towards deposits.