ONS – Wealthiest FTBs benefit most from Bank of Mum & Dad
Intergenerational wealth transfers – in the forms of gifts or loans – are increasingly being used to help first-time buyers on the housing ladder, according to new research from the Office of National Statistics.
For the first time the ONS has analysed data from its Wealth and Assets Survey to look at the distribution of gifts and loans across age and income brackets.
It found that the average inheritance was £11,000 across all age groups, with those in the 55- to 64- age bracket most likely to receive an inheritance. Within this age group the average inheritance in the last two years was £33,000.
In contrast those in the 25- to 34-year age bracket were most likely to receive a gift or loan from a family member. The average value of these gifts was £2,000 with 11 per cent of those in this age bracket receiving such a gift in the last two years.
Those in the middle of the wealth distribution were the also the most likely to receive cash gifts or loans from friends or family.
The ONS points out that while the median cash gift received over the last two years was £2,000. This also varies across the income distribution, with those in higher income brackets receiving a median of £3,000.
“This means that not only are those towards the top of the income distribution more likely to receive a gift or loan, but for those who do their value is on average higher,” the ONS says.
It adds: “Rising levels of household wealth in the UK mean that older households today have higher levels of wealth that they can leave to younger generations, either through inheritances, gifts made during the donor’s lifetime or loans.”
“As a consequence it is important to understand more about their impact on wealth inequality, social mobility and the intergenerational transmission of advantages.”
Lifetime mortgage specialist Responsible Life managing director Steve Wilkie says: “It’s no surprise the 25-44 years olds are the most likely to receive a gift or loan from a family member. These are the people trying desperately to get on the housing ladder, but struggling to save for a deposit with stagnating wages, high rental costs and the rising cost of living.
“This desire to support younger members of the family partly explains why there has been such a large rise in equity release this year.
“Homeowners released £11m from their homes every day in the last quarter, and a large chunk of this will have been early inheritance, to help younger family members buy a property, but also to contribute towards other costs such as school fees and general living expenses.”
Equity release lender, More 2 Life chief executive Dave Harris says: “Wealth transfer between generations is playing an increasingly important role in helping to boost the finances of young people, whether it is help them buy their first property, pay off student debt, or even help to finance a wedding.
“The Equity Release Council’s Autumn Report revealed that more and more homeowners have been using equity release to help their relatives buy their first homes: in 2016/17 1.1 million properties in England had been purchased with the support of a gift or loan from family or friends.”
Source: Mortgage Strategy