Helping Your Generation Y Children with Home Ownership
Owning their own home is extremely important to young adults. However, why is establishing a career or settling with a partner not as discussed? Because in the current environment, the latter milestones are attainable, while the former, it seems, is not. With the likelihood of home ownership for those aged 18 to 34 lower than it has ever been, Generation Y are unsure of their futures and sometimes Mum and Dad need to be called in for backup.
Saving for a house
Research conducted by WeBuyAnyHome analysed the saving habits of 2,194 18 to 34 year-olds. Data revealed that 56% of those surveyed do not have any savings towards a house deposit. With rental prices draining the salaries of 18 to 34 year-olds, the majority are finding it near impossible to siphon off any spare money into a savings account.
However, 5% of those surveyed have more than one savings account towards a house deposit and a further 13% are utilising either the Help to Buy ISA or Lifetime ISA to secure a home in the future. Whilst these percentages sound small, this equates to 1 in 5 respondees having some level of savings towards a property of their own.
When analysing gender traits, 57% of women had no savings for a property when pitted against the 48% of men. The remainder of men all have some level of savings, whether it’s an ISA account, savings or cash.
Women were more likely to have an ISA or general savings account. However, less than 1 in 2 have dedicated house savings and a further 13.1% have savings that aren’t intended for use towards a home.
Can young adults buy properties alone?
Back in June 2018, we reported that the majority of people do not believe it is possible to buy a property on their own. Our study revealed that 1 in 3 18 to 34 year-olds believe buying a property alone is impossible, which could perhaps account for the 56% of this demographic without any savings for a property.
Members of Generation Y who have not yet secured a home of their own have been moulded to become very cynical. Very rarely will a Generation Y person accept that a friend has bought a property on their own. The first thought is always; “How much did their parents give them?”
The Bank of Mum and Dad, in recent years, has been lending their 20 and 30-something children an average of £18,000 to put towards their first property. Around 317,000 housing transactions in 2018 will involve some level of financial help from a parent.
As it stands, borrowing is actually quite cheap. However, the issue lies with property prices being so high. Therefore, whilst mortgages might be affordable, trying to stump up £50,000 for a deposit and associated fees is not something that many under-35s can achieve alone.
Due to pensions freedoms, a large number of over-55s are drawing down on their pension and giving the money to their children to use towards a house. However, parents offering up these lump sums are drastically mitigating their retirement income. With older people living longer and longer, only having enough money to last until you are 75 is not going to be enough.
Should parents stop giving money to Generation Y children?
To some parents, £50,000 will be a drop in the ocean and their pension pot or savings account won’t miss it. However, for some, handing over a vast amount of cash could have a real dent to their lifestyle at retirement.
Furthermore, if your Generation Y child has a property which falls into negative equity and mortgage repayments increase, you could see your money sucked into a blackhole. It is worth thinking about all the ‘what ifs’ and consider preserving the capital in your pension rather than giving your children a lump sum. This would mean your pension pot is still intact and the money is still there whenever you need it. Furthermore, should you not need it, it will be neatly ring fenced as a pension for your children to inherit tax free.