The Rising Role of ‘Bank of Family’ in UK Housing Market

At least one in five parents in the UK are unlocking the wealth tied up in their homes to help young family members onto the property ladder, according to a recent research conducted by Legal & General.

Unleashing Property Wealth: Parents Lending a Hand

Dubbed the ‘Bank of Family’, this group holds a whopping £3.5 trillion in national housing wealth – a figure that underscores the significance of property assets within UK families. Legal & General found that 18% of parents, grandparents, and other property-owning family members are offering a financial leg-up to prospective homebuyers within their circle, thereby playing a key role in sustaining the UK’s housing market.

This group’s involvement in helping family members secure property comes despite a hefty repercussion. Almost three quarters (72%) of these guardians and elderly helpers were not advised regarding the financial risks ahead of offering their support, leaving a considerable footprint on their own finances, with nearly 69% experiencing a decline in their financial health.

Equity Release and Its Role in the Housing Market

So, how are these ‘Banks of Family’ supporting the young homebuyers? The answer lies in equity release, downsizing, or remortgaging properties they own. Equity release, a key mechanism, is a financial solution that lets homeowners extract the cash tied up in their property without forcing them to vacate their house.

Rudy Khaitan, managing partner of Senior Capital, emphasised the importance of equity release in stimulating the housing market, especially during the current cost-of-living crisis many households face. He believes that as properties are valuable financial resources, ensuring they are effectively utilised could augment market activities, in particular those involving first-time buyers.

A Silver Lining for First-Time Buyers

The confidence in the heightened engagement of first-time buyers may seem optimistic, especially against the backdrop of data revealing a 22% slump in first-time buyers between January and August this year, as reported by Halifax.

Yet, Khaitan views this situation from a different lens. His conviction, rooted in the everyday struggles of older homeowners, suggests an untapped potential. “Many over 55s find themselves in a paradoxical situation – they are ‘asset-rich’ due to the value of their homes, yet ‘cash-poor’ with limited disposable income”, he explained.

“In today’s society, as the cost of living continues to rise, many find themselves struggling to make ends meet, despite owning valuable properties. Equity release offers a solution to this dilemma, enabling homeowners to tap into the wealth tied up in their homes. It can provide a much-needed cash injection to enhance their quality of life, cover unexpected expenses, or even help their families”, Khaitan added.

Our homes represent more than just a roof over our heads. For many, it’s also a vital lifeline that can boost quality of life, or help the younger generation realise their dream of owning a home. As we navigate these turbulent financial times, the ‘Bank of Family’ and its £3.5trn of property wealth are set to play an influential role in bridging the gap between ‘asset-rich’ but ‘cash-poor’ homeowners and the new generation of potential homebuyers.