Six in ten parents can afford to make a financial contribution to help their children buy their first home however only 5% can pay for the full deposit
- 61% of parents are also helping their children financially through other means incl. rent-free accommodation and free childcare
- Parental financial assistance can halve the time it takes for millennial FTBs to save for deposit as most can only save 7% of their income towards a deposit
Post Office Money today revealed the true scale of ‘Bank of Mum & Dad’ as 41% of parents are not in a position to provide any financial support towards helping their child get on the property ladder.
Parents are making invaluable contributions in a variety of other ways including letting their aspirational FTB child live at home for free (43%) while 25% are charging reduced rent and 15% are providing free childcare.
The wealth of UK parents
According to the report using data from Opinium Research and the Office for National Statistics (ONS), the parents of millennials have an average financial wealth of £52,746 (£70,704 in London). If they choose to assist their child’s home purchase, on average they can afford to use a third (35%) of this wealth - equivalent to £18,396 (a third of the average deposit for a first-time buyer in the UK).
Four in five (81%) parents surveyed are more than happy to provide financial support if they can. However, many parents do not feel they can provide their children with financial help. Only one in 20 (5%) say they can afford to make a financial contribution to the value of £50,000 or more, which is equivalent to the average UK deposit for first time buyers. 7% felt guilty that they were not able to provide financial support for their children.
Of those that have provided financial assistance to their children 59% gifted the support and 40% loaned the money.
The landscape for millennials
Given that 95% of parents are unable to provide a full deposit and that millennials can only afford to save 7% of their income towards a deposit [see Notes to Eds] the average deposit could take 18 years to save for. Although this drops significantly outside of London and the South East.
As a result it’s no surprise that, 43% of millennials who don’t think they’ll be able to afford a home feel it is because they won’t be able to afford a deposit in the near future.
Of those that do aspire to own their own home, 58% are planning to use their personal savings, with 22% hoping for some form of financial assistance from their family.
Parental support can significantly reduce the average amount of time millennials can expect to save for a deposit.
Outside of London and the South, parental assistance can help reduce the time it takes to save for a deposit by more than half. In London and the South, it’s apparent that homeownership is only possible either much later in life when incomes are higher, or with above average parental help.
Owen Woodley, Managing Director, Post Office Money comments:
“Our research found that millennials can, on average, only save 7% of their income towards a deposit which, given high cost of homes in the UK, is leaving many chasing a dream but struggling to realise it.
“For reasons beyond their control, the vast majority of the younger generation will need help and we can see that parents are doing all they can to support their children. 59% of parents we spoke to are able to make a financial contribution and many supported their children’s saving in other ways. However, only five per cent of parents were able to provide the full amount required for a deposit and so FTBs are still having to work hard to make their dream a reality.
“We are committed to helping to address these changing needs through developing innovative mortgage solutions for both first time buyers and their parents.”
The impact on relationships
43% of millennial homeowners who received support to buy said this was because their parents knew they wouldn’t have been able to purchase a home without it and naturally there were emotional implications on their relationship as a result.
- 66% felt grateful to their parents as they felt more financially secure as a result
- 20% reported it had a positive impact on their family relationship
- 32% felt indebted to their parents
Owen Woodley adds:
“Whilst it is excellent to see the positive impact parental support is having on family relationships, it is important that families are having frank financial conversations. With 24% having not agreed any repayment terms and only 15% having an informal agreement in place, relationships could become strained in future if families are not in agreement with their financial arrangements”.
Gratitude Bank - Post Office Money competition
To celebrate the things parents that do to support their families while they are getting on the property ladder, Post Office Money is launching the Gratitude Bank – an opportunity for young people to say thank you. Whether supported with a deposit, rent-free living or even some good advice – this is their opportunity to say thank you and give something back.
It doesn’t matter who your mortgage provider is, if your family have helped you buy your first home, you can enter. Look for Post Office Money on Facebook or Twitter and tell us your story using the hashtag #OnTheLadder for a chance to win 1 of 15 £1,000 gratitude cheques from the Post Office Gratitude Bank for your parents. Full terms and conditions are available on our website: http://corporate.postoffice.co.uk/gratitudebank
About the Post Office
Post Office Limited has an unrivalled national network of over 11,600 branches across the UK, more than all the high street banks combined, and sits at the heart of many communities across the country.
It provides around 170 different services and products spanning financial services including savings, insurance, loans, mortgages and credit cards. Post Office also offers Government services, telephony, foreign currency, travel insurance and mail services.
99.7% of people live within three miles of their nearest Post Office outlet. For many rural communities the Post Office is the only retail outlet. Post Offices remain highly valued and trusted and are the focal point for many communities. For more information, visit www.postoffice.co.uk.