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Helping your child on the property ladder

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Homeownership is considered a crucial step into adult life – in fact, more than four out of five (81%) people1 agree getting on the property ladder is one of the most important life milestones. However, those who are heading for retirement, or are already retired, may have to think differently about their finances, as they turn to support their children who are struggling to buy their first homes.

Almost a third
(31%) of parents over 45 years old, have helped their child get on the property ladder

In July 2016, the average house price for a first-time buyer was £195,4842 – not much less than the UK average house price of £216,7503. With wages failing to rise as quickly as house prices, more than a third of millennials4 are feeling they’re priced out of the housing market.

The ‘bank of mum and dad’ has become more and more common, as millennials find it hard to take their typical steps into adulthood. Our recent Real Retirement Report5 unveiled that almost a third (31%) of parents over 45 years old, have helped their child get on the property ladder. Almost half (43%) of those over 45 also believe that their children would not have been able to get on the property ladder without their help.

We spoke to Maureen Connell from London, who recently helped her son and his fiancé get on the property ladder. She explained how she felt properties on the market were “so overpriced, especially around the London region” and how there’s “not enough affordable housing, or even a range of properties to choose from.”

Turning to multigenerational living

Connell discussed with us how her son began his long journey of saving towards his first home, and the difficulties they endured on the way. “I invited my son, and his girlfriend at the time, to move in with myself and my husband. We let them live rent-free so they could save enough money towards a deposit.” Her son and partner spent two years living in the Connell household saving up, hoping to stay nearby for work and family.

“They both wanted to stay close by to us, however they could only afford the one bedroom properties available. Unfortunately, there wasn’t any affordable two bedroom houses nearby, which was more ideal for them.” Connell continued to explain that every time her son had enough money for a one bedroom house, the prices went up again, so they’d have to keep saving.

In the end, Connell’s son and partner decided to look at properties outside of the London area. “We suggested that he looked outside of London,” she explained. They understood that “he would have to spend more time commuting into the city for work, but at least they would have the property they wanted and can afford.” So, they began their house search further afield.

Lending a helping hand

However, even saving by moving back home wasn’t enough for Connell’s son to get onto the property ladder. So she decided to turn to some of their retirement funds to help further “My husband and I looked at our finances, and decided to help our son; we took a large sum of money from our pension pot.” Her son’s partner also received a small inheritance from a relative who’d passed away. “With their savings, our gift and the inheritance, not only could my son get on the property ladder, he got himself a bigger home than expected – and could focus on starting a family.”

The Connell’s son decided to move out of the city. His commute to work was longer, and he was further away from his family, but the financial support from his parents, along with benefits of moving back home had allowed him to get on the property ladder.

Has helping our children become the norm?

Our research reflects on the future difficulties for younger generations getting on the property ladder. Although there’s not enough affordable housing on the market, some young people are fortunate enough to get a helping hand from the generous bank of mum and dad. It seems to be more common for parents to support their children when buying their first house, through ways such as gifting money, or even dipping into their pension pots.

However, the report revealed that over a third (37%) people over 45 would like to help a family member get on the property ladder, but can’t afford it. More than half of those over 45 would have to review their retirement fund - and if they have enough to live off - before helping a family member out financially. This is why some are turning to multigenerational living – letting their offspring move back home – as an alternative way to help.

Connell reminisced back to when she was saving to get on the property ladder. “When I was looking for my first home, we were fortunate enough to have a range of affordable properties to choose from. You’d only have to spend a year saving a 10% deposit, and you were fine – and that was in London.” She told us that if she were looking for a home now, she wouldn’t even know where to begin.

This shows just how much times have changed. The reality for many retirees is that they may have to turn to their pension pots, or multigenerational living, just to help their children get their foot onto the property ladder.

One roof, multiple generations: can it work?

As families look for ways to save money, multigenerational households are becoming a common solution - but can they learn to live together?

Find out how

Multigenerational living and retirement

This case study looks at a real-life scenario, where multigenerational living are taken as the first stepping stones towards financing retirement

Learn more here

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Additional sources

[1]Aviva’s Changing Households Report 2016 https://www.aviva.com/media/.../Aviva_Changing_Households_report_2016_Final.pdf
[2]UK House Price Index England: July 2016
[3]UK House Price Index: July 2016
[4]Aviva’s Family Finance Report 2016 https://www.aviva.com/.../Aviva_Family_Finances_Report_-_Jan_2016_-_digital.pdf
[5]Aviva’s Real Retirement Report 2016 www.aviva.com/media/upload/Aviva_Real_Retirement_Report_summer_2016_-_embargoed_for_Wed_27_July.pdf

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