With 19% of equity release customers using all or part of their funds to support family and friends, new research from equity release lender more2life has highlighted the impact this could have on first-time buyers across the United Kingdom.
Scots would see the biggest benefit paying off their mortgage 11 years sooner while those in Wales would clear their debt in 10 years and those in England in eight years.
By sharing the average amount of equity gifted to fund a deposit (£60,589) with children or grandchildren, over-55s could help them to secure a lower LTV and therefore a cheaper rate mortgage. Should the first-time buyer be able to pay the same monthly repayments as someone who purchased without this level of deposit, they could substantially reduce the time taken to pay off their mortgage, more2life said.
To compare the possible savings a UK first time buyer could enjoy depending on which part of the UK they buy in, more2life consulted available data from the Land Registry’s most recent UK House Price Index to find the average amount of money paid by a first-time buyer across the three different countries.
Ben Waugh, managing director of more2life, said: “With the recent Bank of England rate increase and the cost of living continuing to bite, there is no denying that many people are finding it harder than ever to take that first step onto the property ladder. Affordability criteria are stricter and even with the advent of 100% deals, younger borrowers are seeing their dreams of owning their own home getting further and further away.
“That said, this research shows unequivocally that members of the older generation are uniquely placed to provide real aid by donating a gift unlocked from their own home equity. We have already seen that an equity release enhanced gift of an average size could trim as much as 20% from the time taken to pay off a mortgage in London, one of the most competitive property markets in the world.
“What our new research demonstrates is the wide relevance of equity release as a tool of financial empowerment, when combined with expert financial advice. The bank of Granny and Grandad has an expansive scope, stretching from Edinburgh to London to Cardiff, and advisers are prepared to guide older customers through these financial decisions.”
