Britons Are Dipping Into Pensions to Help Children Buy Houses
(Bloomberg) -- Britain’s baby boomers are sacrificing their retirements to hoist their poorer offspring onto the property ladder.
Nearly one in five over 55-year-olds are accepting lower living standards to help family members to buy a home, according to a Legal & General report on Tuesday.
This year, it’s estimated that more than 50,000 U.K. housing transactions will be at least part funded by parents or grandparent taking cash out of their pension pots. In about 14 percent of cases where parents provided funds, they sold part of their own property wealth.
“Parents and grandparents across the U.K. are often digging deep into their pension pots to support loved ones,” said Chris Knight, the CEO of Legal & General Retirement. That’s leaving them “feeling the pinch as they approach retirement.”
The so-called bank of mom and dad is set to be a 5.7 billion-pound ($7.3 billion) mortgage lender this year -- accounting for one in four U.K. housing transactions. But parents are starting to tighten their purse strings as interest rates rise and grim Brexit predictions make Britons wary of the future. The average contribution of over-55s to their family members dropped by 20 percent compared with 2017.
Millennials, born in the 1980s and 1990s, are struggling to become homeowners because they are often priced out of the market -- especially in London where first-time buyers have to pay about 2.5 times the national average to get a home.
The Bank of England raised its benchmark rate to 0.75 percent, the highest since 2009, at the beginning of the August, adding upward pressure to mortgage rates.
©2018 Bloomberg L.P.