Parents raiding savings to help offspring buy property

With housing affordability at its best level for six years, 70% of parents with children over the age of 18 believe now is the right time for their children to get on the housing ladder, according to Lloyds TSB.

One in four of these parents plans to use their savings to help their children buy their first home and, on average, they have a total of £41,000 saved in order to provide financial assistance to all of their children.

After a rapid decline of first-time buyers during 2008, the number returning to the market is gradually beginning to increase. In January 2009 there were 8,600 first-time buyers compared to 19,200 in August. In the second quarter of 2009, first-time buyers accounted for 38% of house purchases.

Parents said they were keen to help their adult children take advantage of the current market conditions but just 8% felt they already had a savings pot large enough to help each of their children.

One in seven parents admitted they will need to keep on saving and one in five said that, while they were willing to provide financial assistance, their children also had to contribute to the deposit themselves.

Helping each of their children equally is very important to parents, with 93% intending to provide the same financial assistance to all of their children. Of those who don’t intend to help their children equally, 60% said it was because their children earned different salaries while 24% said their other children didn’t need help because they were buying with partners.

Stephen Noakes, commercial director of mortgages at Lloyds TSB, said: “The current housing market presents a real opportunity for first-time buyers, as long as they are ready to buy with a deposit. Housing affordability is back to the level it was in 2003, so many parents with grown-up children want to help them take advantage by using their savings.

“Lloyds TSB’s Lend a Hand mortgage lets parents use their savings without actually having to write their children the cheque. Their deposit is held in a savings account paying a competitive rate of interest and, after three years, they are free to use their savings again as they wish, maybe to help their next child buy their first home.”