Use Of The Bank Of Granny And Grandad On The Rise As First-Time Buyers Struggle To Get Onto The Property Ladder

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The Law Of... drawing from the silver bank

  • More than one in six (17%) first-time buyers now expect to need help from their grandparents as either a gift or loan to make their first house purchase
  • Nearly half (46%) of first time-buyers are expecting to need some form of gift or loan from either parents or grandparents to make buying affordable
  • As many as 14.5% of first-time buyers are expecting multi-generational benevolence, with a gift or loan from parents AND grandparents expected to be required
  • Creating legal ownership documents is essential to protect all parties in a house purchase – yet one third intend to proceed without legal protection in place

Use of the ‘Bank of Granny and Grandad’ on the rise as first-time buyers struggle to get onto the property ladder

Grandparents are increasingly helping first-time buyers onto the property ladder, as rising house prices push property out of reach for many young buyers without help. More than 15% of first time buyers are expecting to receive a gift from their grandparents to help them buy their first home, according to research from the conveyancing team at law firm Simpson Millar. The proportion expecting to need either a gift or a 'loan' from grandparents rises to one in six (17%).

The 'Bank of Mum and Dad' has traditionally tended to be the source of financial gifts or loans for house purchases, and still accounts for the lion’s share of gifts or loans, with one or both required in 43% of purchases. But grandparents are increasingly being tapped for help with deposits, whether they are simply helping out their grandchildren or using gifts as a way of mitigating inheritance tax. House buying is increasingly a multi-generational affair, with one in seven prospective first-time buyers (14.5%) now saying they’ll need contributions from mum and dad and grandparents too.

However, while the benevolence of family members is both welcome and essential for many, Simpson Millar are today warning older relatives to ensure their generous contributions to the “forever home” doesn’t end up being put at risk in the many cases when relationships break down. One third of first-time buyers surveyed (33%) said they would proceed with no formal legal agreement in place to protect respective contributions to the purchase in the event of a split. Fears of damaging trust in their relationship were cited as a reason by 18% of respondents. Where one of a couple is using family money to make a greater contribution to the deposit, the firm is warning family donors to press for a simple legal agreement to protect all parties in the event of a parting of the ways.

Lisa Gibbs, Conveyancing Partner at Simpson Millar Solicitors, said:

"The benevolent grandparent has always been a fixture in many a family. But it is only in recent years that this has routinely involved providing thousands of pounds to help the grandchildren reach the first rung of the housing ladder. Many grandparents nowadays are canny investors, with a portfolio of assets to fund their retirements. However, when it comes to helping a favourite grandson or granddaughter out with a deposit to buy with their intended life-partner, a bit more canny investment advice may be advisable."

"When multiple generations of the ‘family silver’ are being staked, it may need older and wiser heads to step in and advise some common sense. Not all house purchases end up being ‘forever homes’. With this in mind, it is only sensible to have paperwork in place to ensure equity is shared equitably when ways part."

The Law Of... drawing from the silver bank - Funding Your Grandchild's First Home


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