New research shows that eight in ten (79%) middle class parents are helping support their adult children financially, one in four of whom are helping with mortgage payments specifically, according to the fourth Saltus Wealth Index Report.
The average rate for a two-year fixed deal has recently surpassed 6% which pushed the average repayment on a 25 year £200k mortgage up £383.50 in just two years. Over a two-year period, that amounts to an extra cost of £9,204; many households are struggling to cover that extra cost and are increasingly turning to ‘The Bank of Mum and Dad’ for help.
The report surveyed more than 2,000 people in the UK with assets, including property, of £250,000 or more, and found that eight in ten (79%) are financially supporting their adult children in some way, of those, nearly one in four (23%) are supporting with mortgage payments specifically, while a further 20% are helping with rent.
While parents are increasingly being called upon to cover their adult children’s mortgage and rent payments, according to the latest Saltus Wealth Index, it is not the most common use of financial support received from parents.
School fees have risen by around 8% in the past year and are set to see a further 22% hike in the next academic year, while grocery inflation is currently 16.5%. According to Saltus research, it is these costs middle class parents are most likely to be covering, with 42% paying for school fees and 32% covering grocery bills.
According to the Saltus Wealth Index Report, four in ten (39%) of all respondents say rising mortgage rates are already putting a strain on their own cash flow, and a further 47% say further rate rises will cause issues. Nevertheless, they are still willing to provide support to their children; 22% have reduced their own pension contributions, 20% have tapped into housing equity, and 20% have sold another asset in order to help.
The research also found that one in 14 (7%) of respondents aged 45 and over say their children’s wellbeing is their greatest concern – above losing money and their own health and safety – so it is perhaps understandable so many are willing to compromise their own financial situation to help their children improve theirs.
Mike Stimpson, Partner at Saltus said “Our research shows just how much financial support adult children need in the current climate, and the lengths to which their parents are prepared to go to help them.”
“Traditionally, parents have helped out their children with deposits on houses, and other investments that grow with them, but now, we’re increasingly seeing clients forced to bring those investments forward to help their children with everyday costs such as mortgages and household bills.”
“Saltus Wealth Index research shows 1 in 4 parents who are helping their children are doing so specifically to help with rising mortgage costs, and that 1 in 5 have reduced their own pension contributions in order to provide that financial support to their children, and we are certainly seeing this mirrored in what our own clients are doing. Many are now putting less money into their pension so that they can help their adult children with mortgage payments and utility bills, others have had their children move back in with them because they can’t afford to pay their rent and some have even delayed their retirement so they can continue to provide support.”
“While our research suggests that most parents are more than happy to help support their adult children where they can, this level of reliance is not sustainable. If the younger generation continue to rely so much on their parents, it is going to have a huge knock-on effect on the whole family. Their parents have been planning for their retirement – and in most cases, planning the best way to pass on an inheritance – based on their own needs, not necessarily the needs of their children. Many parents will now need to revisit their plans to ensure they are still realistic given these changes in circumstances.”