Recent figures by Legal and General show that approximately one in four housing transactions involve help from ‘Bank of Mum and Dad (BOMAD). In addition, the Building Society Association (‘BSA’) in their November 2018 report see this role of BOMAD increasing over the next 5-10 years.
As wage growth has failed to keep up with rising house prices and banks have tightened their lending criteria, many young people are finding it almost impossible to buy their own home without the financial help from family. In many cases parents and grandparents are providing this help by withdrawing cash sums from savings and pension pots, yet a significant 92%, according to the FCA’S 2018 Financial Life’s Survey, are not seeking any kind of financial advice.
The challenge for those wishing to lend or gift money is to ensure that this is managed in a way that takes account of the rules on gifting, is the most tax efficient and doesn’t risk funds running out later in retirement. This means setting up strategies and arrangements that safeguard and protect all parties concerned.