Nearly one in five (18%) parents and grandparents who have helped their family members get onto the property ladder used their own property wealth to do so, Legal & General (L&G) has found.

A survey by the group and the Centre for Economics and Business Research (CEBR) found that 42% of parents and grandparents, known as the ‘bank of mum and dad’, aged over 55 have helped fund a family member’s property purchase.

To meet these costs, 68% of those parents and grandparents who contributed said they used a combination of their savings, with 22% using investments and 14% dipping into their pension to support their family members.

Furthermore, 18% said they have used their own property value to help relatives onto the property ladder, either through equity release, downsizing or remortgaging.

Among L&G’s home finance customers, 11% took out a lifetime mortgage in the past year to make a financial gift to a family member.

On average, prospective homeowners who use the bank of mum and dad receive £25,600 in support from family to purchase a property.

However, research by L&G and CEBR found that despite providing financial gifts, nearly three quarters (72%) of parents and grandparents did not seek formal advice, raising concerns among experts.

Chief executive officer at L&G Home Finance, Craig Brown, said: “For families across the country, property is often one of the most significant financial assets they have. We know that many parents and grandparents feel there is no better use of that asset than to provide for the future of their loved ones, helping many younger people overcome the huge challenge of getting on the first rung of the property ladder.

“However, it’s really important people take a considered approach when providing support like this. Our research shows many parents and grandparents do not seek any guidance or advice before parting with significant amounts of money, unless of course it’s a requirement of the product, as with lifetime mortgages. This is a big decision and people should carefully consider how and what they gift to ensure they don’t risk their own financial difficulties later in life.

“While not for everyone, later-life lending products, such as lifetime mortgages, might be suitable for some people over 55 to help family members step onto the ladder, but these should only be considered following a conversation with an adviser about all the options available to provide family with support.”

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