41% of parents cannot provide any financial support towards helping their child get on the property ladder, Post Office Money has reported.
It found that parents are helping in a number of other ways including letting their aspirational first-time buyer child live at home for free (43%), 25% charging reduced rent and 15% providing free childcare.
According to the report using data from Opinium Research and the Office for National Statistics (ONS), the parents of millennials have an average financial wealth of £52,746 (£70,704 in London). If they choose to assist their child’s home purchase, on average they can afford to use 35% of this wealth – equivalent to £18,396 (a third of the average deposit for a first-time buyer in the UK).
81% of parents surveyed are more than happy to provide financial support if they can. However, many parents do not feel they can provide their children with financial help. Only 5% say they can afford to make a financial contribution to the value of £50,000 or more, which is equivalent to the average UK deposit for first time buyers. 7% felt guilty that they were not able to provide financial support for their children.
Of those that have provided financial assistance to their children 59% gifted the support and 40% loaned the money.
As 95% of parents are unable to provide a full deposit and that millennials can only afford to save 7% of their income towards a deposit the average deposit could take 18 years to save for, although this drops significantly outside of London and the South East.
Consequently, 43% of millennials who don’t think they’ll be able to afford home feel it is because they won’t be able to afford a deposit in the near future.
Of those that do aspire to own their own home 58% are planning to use their personal savings, with 22% hoping for some form of financial assistance from their family.
Outside of London and the South, parental assistance can help reduce the time it takes to save for a deposit by more than half.
Owen Woodley, managing director of Post Office Money said: “Our research found that millennials can, on average, only save 7% of their income towards a deposit which, given high cost of homes in the UK, is leaving many chasing a dream but struggling to realise it.
“For reasons beyond their control, the vast majority of the younger generation will need help and we can see that parents are doing all they can to support their children. 59% of parents we spoke to are able to make a financial contribution and many supported their children’s saving in other ways. However, only five per cent of parents were able to provide the full amount required for a deposit and so FTBs are still having to work hard to make their dream a reality.
“We are committed to helping to address these changing needs through developing innovative mortgage solutions for both first time buyers and their parents.”
43% of millennial homeowners who received support to buy said this was because their parents knew they wouldn’t have been able to purchase a home without it and naturally there were emotional implications on their relationship as a result.
Woodley added: “Whilst it is excellent to see the positive impact parental support is having on family relationships, it is important that families are having frank financial conversations. With 24% having not agreed any repayment terms and only 15% having an informal agreement in place, relationships could become strained in future if families are not in agreement with their financial arrangements.”