The inter-generational dependency crisis exposed

Written by Rebecca O'Connor on 7th November 2017

Futurists are looking into their crystal balls and seeing an “escalating housing gap crisis” as young people funded by the Bank of Mum and Dad will increasingly need to repay the favour by supplementing their parents’ retirement income, which will be much smaller because they gave away a chunk of their cash to help out their kids.

The knock-on effects of THAT will be that future generations will have less savings of their own to support their own dependents to get on the ladder.

All together now: ARGHHHHH!

In a scary vision of ever-increasing debt that will affect children and grandchildren you don’t even know about yet, William Higham, futurist, says: “the challenge facing first-time buyers of how to get on the housing ladder is one that many families choose to tackle together. First time buyers using their parents’ available funds towards a deposit is a more efficient use of a family’s joint wealth– transferred at the point when it is most beneficial. However, with the data indicating that younger parents having fewer available savings, this system might not be entirely sustainable for future generations of buyers. This could have a wider impact on the UK economy and retirement incomes for future generations. This is something that will need to be addressed in the future.”

Parents currently spend a third of their total wealth (£18,396) helping dependents on the ladder. Further down the line, when they retire and don’t have enough wealth to support themselves, the research, from Post Office money, suggests that millennial children will have to help them out in return.

This trend is made worse by house price rises, as the proportion of the total wealth pot parents have to use to contribute to the same % deposit increases.

The Post Office research found that already, 41 per cent of parents are unable to provide any financial assistance to their children and only 5 per cent can support with a full deposit. With parents less able to help (that Bank of Mum and Dad is dwindling) but that dependence on outside contributions continuing, the drop in youth home ownership will be exacerbated and the renting trend will continue.

More worrying still is that parents who own property have more savings than those who rent (ave £54,177 vs ave £19,629) and so can better afford to help children buy (£18,611 vs £7,568). That wealth divide? It’s a widening canyon.

The Post Office report suggests “this will have a huge impact on the gap between rich and poor if definitive steps are not taken to address this. Already we can see that in high-demand areas, homeownership is dependent on above average parental help – in London, for instance FTB deposits now exceed £100k on average.”

Payback time

According to the research, 3 per cent of all parents surveyed are currently contributing financially to parents/parents in law, but 6 per cent of younger parents are doing so (vs just 2 per cent of 55+). However, as the current millennial generation ages they might not be able to provide housing assistance to their own children, as such steps need to be taken to keep the market sustainable. 

Owen Woodley, Managing Director, Post Office Money said: “81 per cent of parents we spoke to want to provide financial support to their children to help them get on the property ladder, but not all feel they are able to – primarily due to a lack of available funds (22 per cent).

We recognise that we need to respond, innovate and deliver products which are responsive to the changing needs of the wide range of these circumstances and our ‘First Start’ mortgage was developed specifically with this in mind.

In a market where millennials can only afford to save 7 per cent of their income towards a deposit, and therefore the average deposit could take 18 years to save for, aspiring homeowners will now, with the help of their family, be able to purchase a home that meets their needs now, a forever home now rather than a comprise which they quickly outgrow.”

First Start Mortgage

  •  First time buyers apply with a sponsor or “co-borrower”
  • The two highest applicant and sponsor incomes will be taken into account when assessing the level of borrowing
  • Up to 95% LTV


Visit for more information.

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