The customers we serve in the equity release market have, on average at least, had great success in the housing market. Property has increased in value at a tremendous rate over the past four decades, and house prices are forecast to continue their climb upwards for years to come. However, for the younger generation, the growth of the housing market has outstripped earnings at such a rate that the housing ladder is being repeatedly pulled upwards and out of reach.
According to recent research conducted by Shelter, in the entirety of Greater London in the month of April there were only 43 homes that were ‘affordable’ for the typical young family – 43 homes in a city of over eight million residents. Outside of London, less than one in five homes on the market were judged to be ‘affordable’. Somewhat less acute but hardly ideal.
Conversely, the parents and grandparents of the typical first-time buyer have had an easier time getting on, and climbing up, the housing ladder. This generational gap has facilitated the growth of the Bank of Mum and Dad, and now thousands of first-time buyers are relying on large loans or gifts from their family to ever have a chance of becoming a homeowner. Average figures are hard to come by, but reports range from £18,000 to £23,000 loaned from parents to children. What’s more, 90% of younger first-time buyers were reported to have needed some level of financial support from family members in 2009. What is clear, therefore, is that the Bank of Mum and Dad is here to stay.
An altruistic choice
However, with withdrawals from the family vaults increasing in frequency and value, Mum, Dad, Grandpa and Grandma will have to find different ways to finance their assistance. Of course, one must make clear that the Bank of Mum and Dad is built on altruism, and the customers should appreciate that it is this affection that underlines any withdrawal. The use of equity release to ‘help family members’ or ‘provide an early inheritance’ is continually cited as one of the reasons people tap into their housing wealth. Repaying debts and mortgages still remains the most popular reason people release equity, followed by making home improvements, but financially supporting the family often comes in third or fourth position.
With over a trillion pounds worth housing wealth at the disposal of homeowners in their sixties, it is unsurprising that many are looking into equity release as a means of assisting their family members.
