Six in ten parents can afford to financially support their children to buy their first home, while only 5% can pay for the full deposit, research from Post Office Money revealed.
Using data from the Office for National Statistics (ONS) and Opinion Research for the report, the financial services brand found that 41% of parents are unable to provide any financial aid to help their child take their first step on the property ladder.
Roughly 61% of parents surveyed are opting for other means to house their aspirational first-time buyers, such as rent-free accommodation (43%), charging reduced rent (25%) and providing free childcare (15%).
With an average financial wealth of £52,746 (£70,704 in London), parents of millennials could afford to use a third (35%) of their wealth if they chose to assist their child’s home purchase. This is equivalent to a third of the average deposit for a first-time buyer in the UK (£18,396).
What’s more, 81% of parents are happy to provide financial support if they’re able to, however, many do not feel that they’re in the position to do so. In fact, only 5% say they can afford to make a financial contribution to the value of £50,000 or more.
This leads to 7% of parents feeling guilty that they were not able to provide financial support for their children. Some 59% of those who were able to support did so through gifted deposit, while 40% loaned the money.
Millennials are not as fortunate as baby boomers, as they are only able to save 7% of their income towards their deposit, which could take up to 18 years to save for. This could be the reason why 43% of millennials who don’t believe they’ll be able to afford a home feel it is due to them not being able to afford a deposit in the future.
Some 58% of those who aspire to possess their own home plan to use their personal savings, with 22% hoping for some financial support from their family.
Owen Woodley, managing director, Post Office Money, commented: “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.”
He continued: “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.”
Millennial homeowners who received financial aid to buy (43%) said this was because their parents knew they wouldn’t have been able to purchase a home without it.
Some 66% of millennials felt more financially secure as a result and are grateful to their parents, while 20% said it had a positive impact on their relationship. Also, 32% felt indebted to their parents after receiving financial support from them.
“Whilst this is excellent to see the positive impact parental support is having on family relationships, it is important that families are having frank financial conversations,” Woodley added.
“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,” he said.