23rd October 2019
BANK OF GRANNY & GRANDAD OPEN FOR BUSINESS AS MORE HOME BUYERS RELY ON OLDER GENERATION FOR HELP
- Significant number (32%) of 18-34 year olds had financial help from grandparents to get on the property ladder1
- Nearly one-in-four prospective buyers expect help from their grandparents13.
- Trussle’s research identifies growing trend of assistance with just 3% of over 55s previously receiving help from relatives to buy a home2
London, 23rd October: Nearly a third (32%) of homeowners, aged between 18 and 34, were given financial help by their grandparents to buy a property1 – compared to just 3% of over-55s2 who previously had the same assistance - according to new research by online mortgage broker, Trussle.
The scale of the growing ‘Bank of Granny & Grandad’ could be explained by rapidly growing house price to income ratios. In 1999, average house prices stood at £80,443 - just 4.5 times the average annual salary of £17,803. Today, average house prices are £234,853 - 7.9 times the average annual salary of £29,5583. Yet today, most mortgage lenders will lend applicants four to five times their household income.
Trussle’s study looks at 2,000 current and aspiring homeowners across the UK. Overall, 12% of existing homeowners received financial assistance from their grandparents4. London leads the way with over a quarter (26%) of homeowners being helped5, compared to just 4% of those in Scotland6, which is at the bottom of the list. This is perhaps unsurprising, considering the average house price in London currently stands at £473,000 – three times Scotland’s average of £155,0007.
According to the research, homeowners were typically 25 years old when they received financial support 8 from their grandparents. The amount of financial help received is, on average, over £7,4009. Using official house price data, this equates to 30% of a typical 10% deposit worth £23,48510. When asked why they received assistance, the majority (63%) said they would either not be able to afford the deposit without help or that their grandparents simply had access to spare money11.
However, those who didn’t receive help from the ‘Bank of Granny & Grandad’ but did get financial support from friends or other family members admitted they were likely to get more money, with the average amount being just over £16,00012.
Looking at prospective homeowners, the ‘Bank of Granny & Grandad’ looks set to continue supporting first-time buyers, and even grow. Nearly a quarter (23%) of would-be buyers are expecting a financial handout from their grandparents13. This compares to just 12% of existing homeowners who’ve had assistance4.
Prospective homeowners expect to wait until they’re 34 years old before their grandparents help them get on the ladder14. On average, this group expects to receive £5,200 worth of support15.
When it comes to repayments, 23% of prospective homeowners expecting financial assistance don’t expect to ever reimburse their grandparents16. This is compared to 28% of homeowners who’ve already received the help and don’t expect to ever repay it17.
Dilpreet Bhagrath, Mortgage Expert at Trussle said: “Saving for a house deposit can be extremely difficult given that the average house price is now nearly eight times income3. This can be even harder for those who are renting at the same time – so financial support from family members is often essential to get on the property ladder.
The research underlines the generosity being shown by grandparents across the UK as they help the younger generation get onto the property ladder.
But, clearly not everyone can rely on financial help from family and friends. There are a range of affordable schemes to help first-time buyers, such as the Help To Buy Equity Loan and Shared Ownership. However, more must be done to improve access to the housing market and this is where both Government and the industry needs to step up and consider innovative new approaches.
At Trussle we’re using our data to help design products that will enable more people to get on the property ladder and make mortgages more accessible.”
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