Research from Key Equity Release has shed some interesting light on the practice of gifting to a first-time buyer. Older homeowners, according to the research, paid out £775 million in gifts in 2020, helping younger relatives to get onto the property ladder for the first time.
The average size of the gift across the entire United Kingdom was around £42,500, which accounts for around two-thirds of the average deposit for a first-time buyer (which is around £57,278). The so-called ‘Bank of Gran and Grandad’, then, is a significant determiner in whether or not a young person can get onto the ladder in the first place. This has helped to exacerbate the divide between rich and poor, among other things; if your grandparents lack equity, or you lack grandparents, then you stand a much-reduced chance of getting onto the property ladder.
Will Hale, CEO at Key, said: “Finding almost £60,000 to use as a deposit for your first home is tough – especially in the current economic environment – and therefore it’s not surprising that many younger people have looked to take advantage of the stamp duty holiday.”
Equity release to help family members
According to Key’s research, around £755 million of a total £3.4 billion in property wealth was released last year. The researchers cite the Stamp Duty holiday as a major factor in creating the rush – everyone wanted to get the purchase across the line before the deadline of March 31st. Since then, the deadline has been extended, so we may yet see a continuation of this practice.
Hale was quick to point to the benefits of this arrangement. “For many people, these gifts will have been the enabler to them buying their first home and is a perfect example of how intergenerational wealth transfer can deliver positive societal benefits. The stamp duty holiday has certainly been a catalyst for more activity in this area but helping family is always a major motivation for older homeowners exploring their equity release options.”
What makes Northern Ireland Special?
In Northern Ireland, the average cost of a deposit for a first-time buyer sits at £29,523. The average size of a gift, however, is a slightly more generous £34,167, meaning that buyers in this case are able to purchase more expensive properties, or that they have increased scope for renovation during the first few months.
This puts Northern Ireland into a special minority of UK regions, along with Wales, the North East, and the East Midlands. In these places, the size of the average gift actually outstrips the cost of the average deposit. In fact, it’s only Wales where this disparity is greater, sitting at 135% to Northern Ireland’s 116%.