6 min read

Sharing the wealth: £390 million released from property to support loved ones in the space of 12 months

Posted in: Research

  • One in 10 (13%) lifetime mortgages are used to give a financial gift to family members, with much of money being used towards first homes
  • Average price of a home borrowed on for the sharing of wealth is now nearly £400,000[i]
  • For over 55s who want to pay the deposit on a property for younger generations, the average amount would be just a 6% loan leaving 94% of capital in their property[ii]
  • Nearly half (47%) of all first-time buyers have said their family will be supporting them with a deposit for a first home[iii]
  • Two thirds of mortgages taken out for financial gifts have the interest paid monthly, indicating the family members benefiting from the loan could be paying this

Of the £3 billion released from equity in homes with a lifetime mortgage within the space of a year, £390 million was taken to give a living inheritance to loved ones.

OneFamily research has revealed that one in 10 lifetime mortgages taken by homeowners over 55 were to help their loved ones out financially. Over half (53%) of parents and grandparents over 55 admit they worry about their children’s and grandchildren’s financial futures[i] and a similar number (42%) say it will be harder for children to get onto the property ladder than it was for themselves.

A lifetime mortgage allows homeowners to access money tied up in the equity in their home. The amount available is dependent on the value of the property and the age of the homeowner. The loan is repaid when the owner dies or goes into long-term care. No money needs to be paid during the term of the loan, although with OneFamily there is the option to pay off up to 100% of the interest or 10% of the loan amount each year. By having these options homeowners can be in complete control of the loan and any interest on it.

Two thirds of mortgages taken out for financial gifts have the interest paid monthly, which is significantly higher than the market average, indicating family members benefiting from the loan may be paying this money. Saving for a deposit is one of the biggest barriers to buying a property, and based on average amount of savings first time buyers put away monthly, to get the average deposit of £23,000 would take ten years[ii]. Parents can gift the money and then the beneficiary can pay the interest on the loan: by doing this only the original loan amount will be left to be paid when the loan is closed.

For over 55s who want to give their loved ones a lump sum for their own house, on the average property valued at £379,000, the amount would require just a 6% loan leaving 94% of capital in the property[iii].

Nici Audhlam-Gardiner, Managing Director of Lifetime Mortgages at OneFamily comments,

“Half of (48%) parents and grandparents who are helping their children financially do so with a deposit to help get them the property ladder[iv] and in many cases customers have been able to help multiple family members using the equity in their homes. Nearly half (47%) of all first-time buyers have said they will need money from loved ones to put towards a deposit for a first home.

“Without the help, saving for a deposit as a single buyer could take nearly ten years[v], so it is great to see that parents and grandparents are using their own properties to give the younger generations a helping hand. A lot is said about wealth being locked up in the older generations, but this is a great example of where wealth is being passed on when and where it is needed”

To find out more about OneFamily Lifetime Mortgages visit:
www.onefamily.com/lifetime-mortgages/

[i] OneFamily Intergeneration report May 2017
[ii] OneFamily young money research, young people are saving £194 a month x 12 = £2,328 a year. £23,000 / £2,328 = 9.8 years
[iii] The average property value for a lifetime mortgage used to help loved ones is £397,000, the average 10 per cent house deposit is £23,000, to release this amount the loan to value would be 6 per cent.
[iv] Intergenerational lending report, May 2017
[v] OneFamily young money research, young people are saving £194 a month x 12 = £2,328 a year. £23,000 / £2,328 = 9.8 years