In 1991, 67% of those aged 25 to 34 were homeowners, yet by 2014 this had declined to 36%, according to figures from the Office of National Statistics (ONS).
Buying your own home in 1997 would have cost 3.6 times a person’s average annual earnings.
However, fast forward 20 years and this figure has doubled to 7.8.
It’s no surprise at all that many younger people feel priced out of the property market.
At the same time, older homeowners are seeking to use housing wealth, in growing numbers, to meet a range of pressing needs, including the provision of financial support for younger family members to bridge this divide.
The Bank of Mum and Dad – and even Gran and Grandad – is increasingly busy: the latest ONS figures on intergenerational transfers found that gifts and loans are most commonly received by those aged under 45.
This is particularly the case among 25 to 34-year-olds, among whom 11% have received a gift or loan above £500 in the last two years.
It is no coincidence that this is the age group who are most likely to be embarking on buying their first home – the average first time buyer is currently 30 – and understandably seeking help to navigate one of life’s most expensive milestones.
Indeed, English Housing Survey data has shown that the number of households in England purchased using a gift or loan from family or friends recently reached a post-2007/8 high of 1.1m, highlighting the importance of transferring wealth from one generation to the next.
Housing wealth’s role in intergenerational lending
Equity release has entered the mainstream of financial services and it is increasingly being used to help reduce the inequality between generations, as well as helping meet later life financial needs.
According to figures from Key, the percentage of customers using property wealth for gifting family a ‘living inheritance’ increased to 28% in the first six months of 2018, up from 23% the previous year.
The potential for housing wealth to provide intergenerational support has been helped by product innovations and flexibilities.
For example, ringfencing some equity as a guaranteed minimum inheritance is offered by four in 10 equity release products, enabling customers to provide both a ‘living’ bequest and a traditional one.
Innovative thinking has transformed the equity release market while maintaining the standards and protections which ensure products are future-proofed to provide good outcomes for consumers.
Property is many people’s largest asset and equity release can play a central role in bridging the generational wealth gap.
However, it is imperative that older consumers factor in their own financial needs in retirement to decide whether releasing equity for the next generation is the best option for them.
Need for advice across all asset classes
The Equity Release Council is the trade body for the UK equity release sector and aims to ensure consumer protection and safeguards.
It believes there is a need for a wider debate on the essence of appropriate advice and distribution across all asset classes, which will be important factors for anyone with multiple financial planning needs for themselves and their families.
A rounded approach to retirement planning and access to good quality guidance is fundamental to helping older people make informed, planned and timely choices through specialist advice.
While the option to release equity is available to over-55 homeowners, it is clear that the potential benefits are far broader.
By playing a prominent role in facilitating intergenerational transfers of wealth, it can help address the socio-economic issue of housing inequality.