Inheritance Tax / News

Record number using property wealth to help younger generations buy homes

Rising property prices and higher interest rates have left younger generations struggling to get on the UK property ladder. The situation has prompted families to get more involved with parents and grandparents using their own property wealth to help younger generations become home buyers. Jack Lear, our UK Financial Planning Manager, looks at how families are supporting the next generation into home ownership.

Today the average home in the UK is worth £290,000 and house prices continue to rise overall, despite some recent bumps in the road. Deposits are climbing too; in 1999 the average was £12,000 whilst now that figure sits at £61,000. For those taking their first steps onto the property ladder these sums can feel significant and unachievable, leaving home ownership even off limits unless some form of financial support is extended. Added to all this are the effects of higher interest rates which are compromising both affordability and the ability of younger generations to meet mortgage repayments too.

So perhaps it’s no surprise that a growing number of parents and grandparents – who’ve themselves benefitted from the UK property boom in recent decades – are finding ways to help children and grandchildren onto the ladder. Recent research has shown that almost a fifth are using their own housing wealth to help younger family members become homeowners.

Astonishingly the so called ‘Bank of Family’ will gift £8.1 billion to homebuyers in 2023, helping finance almost half of all homes purchased by those aged under 55. The trend seems to be growing too, particularly over the past few years, with these figures up almost 50% since before the pandemic. Unsurprisingly the greatest proportion of transactions took place in the London area with two-thirds of buyers receiving some form of financial support from parents or other family members to buy their homes.

Housing wealth is now likely to form a significant part of your capital and estate and you may be keen to access it to gift an early inheritance or help children or grandchildren to buy a new home. A number of options are available if you’re in this position, from downsizing to remortgaging, or even passing down the family home. However it’s vital to review any financial gift – including from your property wealth – with an expert to ensure that you explore all the options, and don’t find your own finances compromised. You may also need to take into account the impact of Inheritance Tax, which could apply if you die within seven years of making any gift of this nature, and capital gains tax too if you are passing on a property to the next generation or selling assets to help the next generation fund their property purchase.

If you are considering helping younger generations with a house purchase, or sharing an inheritance early, it’s important to consider your plans as part of your wider financial planning. Please contact your nearest office to speak to one of our expert team.