House prices are surging by 7.6% within the East Midlands as buyers make the most of a freeze in stamp duty and newly remote workers move, en-masse, towards the suburbs and countryside.
This is excellent news for homeowners, but for first-time buyers looking to leave behind their landlords, it’s making pulling together a sizable-enough deposit even more difficult.
As a result, gifts from older family members are making up a growing share of East Midlands first-time buyer deposits. To understand the scale of the situation, Key, an equity release, mortgage, annuity, and estate planning provider, conducted an analysis of 2021 data. The outcomes are an interesting insight into the size of the bank of grandma and grandad in the region.
The size of gifts from older family members in the East Midlands
The average gift for a first-time buyer deposit from older family members in the East Midlands was £42,162. Interestingly, this was higher than the average deposit amount, £39,052 (or 108% of the sum), implying that first-time buyer gift recipients put down a larger deposit than average first-time buyers, perhaps to buy a costlier property or fund renovations or furniture purchases.
The same pattern was seen in Wales (a £44,208 gift versus a typical £32,663 deposit – 135% of the deposit), Northern Ireland (£34,167 versus £29,523 – 116%) and the North East (£33,350 versus £29,563 – 113%).
How this compares to the national picture
Overall, older homeowners paid out some £775 million in gifts during 2021, with the average amount coming to £42,500. This found almost two thirds the average first time buyer deposit, £57,278 – though this high sum is due to the size of gifts and average deposits working in london (£102,826 and £130,357 – 79%) and the East (£61,532 and £64,910 – 95%).
The East Midlands came fourth in the country in terms of size of first-time deposit gifts, preceded by Wales. The regions that saw the tiniest gifts compared to the size of the typical deposit were the North West (£23,467 versus £34,347 – 67%), South West (£36,351 versus £51,397 – 71%), and Yorkshire and Humberside (£25,217 versus £33,313 – 76%).
What perform the results mean for families and buyers?
The gifts represent a substantial handover of wealth from older generations with savings or retirement capital to space. That said, some of this money may have been produced by equity release. Alternatively, some older members of the family may have planned the gift and saved for some time.
Will Hale, CEO at Key, commented: “Finding almost £60,000 to use as a deposit for your first house is tough – especially in the current economy – and therefore it’s not surprising that many younger people have looked to consider advantage of the stamp duty holiday.
“For many people, these gifts will have been the enabler to them buying their first home and it is a perfect example of how intergenerational wealth transfer can deliver positive societal benefits. The stamp duty holiday has certainly been a catalyst for additional activity in this area but helping household is always a major motivation for older homeowners exploring their equity release options.
“That said, it is vitally important that homeowners get specialist advice if they do decide to use some of the value tangled up in their home to help their own families. Balancing generosity with their own financial security is essential and a good adviser will assist them explore all their options.”