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Younger generations are increasingly turning to the Bank of Grandma and Grandad to help them buy their first home.
With property prices remaining high and deposit requirements continuing to rise, many aspiring homeowners are finding it difficult to get onto the property ladder without financial support. According to research from estate agency Savills, gifts and loans from family members are expected to total £8.3 billion in 2025, rising to £11 billion when inheritances are included.
Last year, more than half of first-time buyers received some form of family assistance when purchasing a home, with outright gifts the most common type of support.
While parents remain the main source of help, grandparents and other relatives are increasingly stepping in too. Many buyers rely on grandparents, aunts, uncles or other family members to bridge the gap between what they have managed to save and the amount needed for a deposit.
Why are grandparents helping more?
Some grandparents may have benefited from decades of house price growth and have fewer financial commitments than younger generations. As a result, they are often better placed to offer support without it affecting their own day-to-day finances.
At the same time, many younger adults are finding it increasingly difficult to save for a deposit while coping with higher housing costs, student debt, and rising living expenses.
“First-time buyers continue to feel the impact of higher mortgage rates, which has stretched affordability and kept the average deposit high and maintained a reliance on the so-called Bank of Mum and Dad” says Lucian Cook, Head of Residential Research at Savills.
“While first-time buyer activity held up better than expected in the early part of the year, the outlook remains challenging in the current interest rate environment.
“Less stringent mortgage regulation and gradual easing of rates over time should help to broaden access to home ownership to a degree. While that will pave the way for more lower deposit mortgages, it’s clear that family support will remain a crucial component of getting first-time buyers on the housing ladder.”
The research suggests that family wealth is now playing a much larger role in determining who can buy a home. For many aspiring homeowners, getting onto the property ladder depends not only on their own earnings and savings but also on whether relatives can help them out financially.
Deposits and affordability remain major barriers
One of the biggest hurdles for first-time buyers continues to be raising a deposit.
Analysis from the Building Societies Association shows that more than half (59%) of today’s first-time buyers have less than £10,000 in savings. On average, they think it will take around six and a half years until they are in a position to buy their first home, with one-in-three (32%) believing they will never get onto the property ladder.
The challenge is particularly acute in London, where deposits are substantially higher. In the capital, Savills says the average deposit exceeded £130,000, far outstripping the average income of first-time buyer households. Despite these higher costs, the proportion of London buyers receiving family assistance was only slightly above the national average.
However, affordability is also a big issue for first-time buyers. Mortgage rates are still significantly higher than many buyers became accustomed to over the previous decade, increasing monthly repayments and limiting borrowing power.
What does this mean for the Bank of Grandma and Grandpa?
For many people in their 50s, 60s and beyond, helping a child or grandchild buy a home has become an important financial decision. While providing support can be hugely rewarding, it’s important to make sure you’re not putting your own financial security at risk in the process.
Before offering any financial help, take time to review your retirement income, savings and future spending needs, as it’s crucial that you leave yourself with enough money to cover unexpected expenses, steep living costs and any care needs you may have later in life.
There are several ways grandparents can help younger family members onto the property ladder.
Gifting savings
One of the most straightforward options is to gift some of your savings towards a deposit. This can provide an immediate boost to a grandchild’s home-buying plans and may help them secure a mortgage sooner.
However, once money has been gifted, you generally can’t ask for it back. Before handing over a large sum, make sure you retain sufficient savings for emergencies and your own future financial needs.
Providing a family loan
Some grandparents prefer to lend money rather than give it outright. This can allow funds to be repaid over time and may be particularly useful if you want to help more than one grandchild in the future.
If you choose this route, it’s usually sensible to put the terms of the loan in writing so everyone is clear about exactly how and when the money will be paid back.
Downsizing
If your current home is larger than you need, downsizing could free up capital that can be passed on to younger family members. Moving to a smaller property may also reduce ongoing household costs, potentially improving your overall financial position.
However, it can involve significant upheaval, so make sure you’re prepared for the emotional and physical toll of leaving your family home. Learn more in our article Is it time to downsize your home? 5 questions to help you decide.
Using equity release
Some homeowners choose to access wealth tied up in their property through equity release, rather than selling up and moving.
Unlike a standard mortgage, with equity release, you don’t usually have to make monthly repayments (although many plans now allow voluntary payments if you wish). Instead, interest is added to the loan and compounds over time. The loan, plus the accumulated interest, is typically repaid when you die or move into long-term care and your home is sold.
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Are you considering releasing equity from your home? Speaking to an experienced adviser can help you to understand your options.
If you think you’d benefit from expert advice, you can book a free consultation with an adviser at HUB Financial Solutions. A qualified, FCA-regulated equity release adviser you can trust will listen to your needs and talk you through your options. HUB Financial Solutions is rated ‘Excellent’ on Trustpilot.
Please note that equity release will reduce the value of your estate. So if it’s not right for you, the adviser will help you understand some alternatives.
While equity release can provide a valuable source of funds, it isn’t suitable for everyone. Because interest rolls up over many years, the amount owed can increase significantly, reducing the value of your estate and the inheritance you leave behind. It may also affect entitlement to certain means-tested benefits. You can use our Lifetime Mortgage Calculator to work out the costs of equity release, and find more information about this in our article How much does equity release cost?
Before proceeding, it’s worth seeking independent financial advice. An adviser can help you understand the long-term costs and assess whether alternatives such as using savings or downsizing might be more appropriate.
Read more in our articles Equity release – what is it and how does it work? and Can I take money out of my property to give to my children?
You can explore some of the different ways to help your child or grandchild buy a home in our guide Nine ways to help your child buy a home.
A final thought…
Although helping grandchildren to buy their first home can be hugely rewarding, experts generally recommend ensuring your own retirement income and long-term financial security are protected before committing substantial sums.
If you’re planning to give a large amount away to your grandchildren to help them with a property deposit, bear in mind it could be subject to inheritance tax (IHT) if you die within seven years of giving the money away. Learn more in our article What is Inheritance Tax?
There are, however, a number of gifting allowances that may help reduce an eventual inheritance tax bill, so it’s worth seeking professional advice if you’re planning to pass on a substantial sum.
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