First-time buyers could slash their first mortgage term by eight years in England and by over a decade in Scotland and Wales by gifting via equity release.

New analysis published by equity release lender, more2life, revealed that one in five (19%) equity release customers are using all or part of their funds to support family and friends.

According to the lender’s research, Scots would see the biggest benefit paying off their mortgage 11 years sooner, while those in Wales would clear their debt in 10 years and those in England in eight years.

By sharing the average amount of equity gifted to fund a deposit, which more2life data suggests is £60,589, with children or grandchildren, over-55s could help them to secure a lower loan-to-value (LTV), and therefore a cheaper rate mortgage.

Should the first-time buyer be able to pay the same monthly repayments as someone who purchased without this level of deposit, they could substantially reduce the time taken to pay off their mortgage. As part of its analysis more2life found the average financial cost over two years for a mortgage purchased at a standard fixed rate 90% LTV over 25 years.

“With the recent Bank of England rate increase and the cost of living continuing to bite, there is no denying that many people are finding it harder than ever to take that first step onto the property ladder,” more2life managing director, Ben Waugh, commented. “Affordability criteria are stricter and even with the advent of 100% deals, younger borrowers are seeing their dreams of owning their own home getting further and further away.

“That said, this research shows unequivocally that members of the older generation are uniquely placed to provide real aid by donating a gift unlocked from their own home equity. We have already seen that an equity release enhanced gift of an average size could trim as much as 20% from the time taken to pay off a mortgage in London, one of the most competitive property markets in the world.

“What our new research demonstrates is the wide relevance of equity release as a tool of financial empowerment, when combined with expert financial advice. The bank of Granny and Grandad has an expansive scope, stretching from Edinburgh to London to Cardiff, and advisers are prepared to guide older customers through these financial decisions.”

Share Story: