Bank of Mum and Dad risking retirement income as average loan hits £24k
The Bank of Mum and Dad could be accepting a more uncertain retirement after financially supporting family members to buy a home, Legal and General has warned.
Its research found that the average contribution from the Bank of Mum and Dad has risen by more than £6,000 to £24,100.
The Bank of Mum and Dad is now the equivalent of a top 10 UK mortgage lender, gifting a total of £6.3bn so far in 2019, and is drawing on a wide range of sources to financially support other family members with a deposit.
Although more than half are using cash (53%), 9% are cashing in lump sums from their pension savings, 7% are using their pension drawdown and 6% are drawing on their annuity income to help support their loved ones’ homeownership ambitions.
Nearly a fifth of over-55s (19%) are gifting money because they feel they have a responsibility to help, but 26% of BoMaD lenders are not confident they have enough money to last their retirement after providing support.15% have had to accept a lower standard of living and 6% are even choosing to postpone their retirement.
However, the Bank of Mum and Dad research has also revealed that consumers are increasingly considering other solutions that can help them to support family members but also pay for the retirement they want to lead. 16% of BoMaD lenders have or would release equity and use that money to financially support their children or grandchildren. This makes it the third most popular source of funds for the Bank of Mum and Dad.
Last year, just 12% of BoMaD lenders said they had sought professional advice from a mortgage broker, while nearly a third (31%) this year had or would seek advice. However, nearly half of all BoMaD lenders (44%) still hadn’t taken (or would not take) any advice at all before gifting money.
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