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With more children staying home well into their twenties and thirties, the days of waving them off at age 18 are long gone.
Figures from the Office for National Statistics show there were 3.6 million young people (aged 20 to 34) still living at home with their parents. This is 28% of that age group – up from 26% in 2013. Sons are slightly more likely than daughters to stay with their parents, third of all young men in this age range back in the family home.
Whether you want to help them on to the property ladder, or you’re just desperate to get your space back, there are plenty of strategies to consider, as we'll explain.
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While some children return for the free laundry service or their mum’s Sunday roast, for the majority it’s simply down to the cost of property. “Buying a place of their own has become such a stretch that they’re forced to save for far longer,” says Sarah Coles, head of personal finance at Hargreaves Lansdown.
“The average asking price of property for a first-time buyer is £229,648, which means they have to save around £23,000 for a 10% deposit. Given the median pay for someone aged 20-29 is £28,918, it’s a big ask.” Renting is expensive too, with the average monthly rent – £1,335 – increasing by 7.4% in the last year.
As this monthly rental payment limits how much can be saved towards a mortgage deposit, living with the folks not only makes sound financial sense, it’s also increasingly becoming the new ‘norm’.
Alexandra Loydon, group advice director at St James’s Place, says: “It’s more acceptable to stay at home or move back after university, especially if there’s debt to pay off.”
As much as you might enjoy having them home again, it’s also perfectly natural to want them to move on and start their lives. So what can you do to encourage them on their way? There are several options available to parents, each with their own pros and cons.
Giving them money towards the deposit is a popular option, with government figures showing that 31% of first-time buyers had help from family or friends to get on the property ladder.
This could be seen as early delivery of an inheritance, potentially reducing a future inheritance tax bill. It’s a clean and simple process, according to Daniel Swift, head of financial planning at TrinityBridge.
“It can bring benefits in speeding up the buying process for your child and it doesn’t interfere with mortgage lending decisions,” he adds. But there are potential pitfalls.
As well as the possibility of triggering an IHT charge if you die within seven years of making the gift and it doesn’t qualify for any available allowances and exemptions, Swift says parents need to take emotional matters into consideration.
“There could be issues if your child’s relationship breaks down and there’s no legal protection,” he says. “It could also cause potential resentment among siblings if the gift isn’t balanced or clearly explained.” Rather than handing over the cash for a deposit, Loydon says some parents might prefer a less upfront approach.
“Lend them the money,” she says. “It remains part of your estate for IHT purposes but it’s protected if your child divorces or is declared bankrupt.”
However, if you go down this route, it’s important that you draw up an agreement detailing the terms of the loan – including when and how the money will be paid back.
Another option that can speed up that first property purchase is to help them with their own savings. Loydon suggests giving them money for a Lifetime ISA.
These can be opened by anyone aged 18 to 39, with the proceeds used for a first home or retirement. “It’s a good way to kick off savings for a property as, for every £4,000 invested, the government gives a £1,000 bonus,” she adds.
It’s important to note that Lifetime ISAs can only be used to pay for properties worth £450,000 or less, which means they may not work for first-time buyers in the priciest parts of the UK.
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You may have only just cleared your own mortgage, but jumping on your child’s mortgage could help them become a homeowner. Again, there are a few options – and catches – available. A joint mortgage can bump up their borrowing capability and give you a share of the property, but it can be messy – especially from a tax point of view.
Coles explains: “If you buy together, not only will they not get the stamp duty breaks for first-time buyers, but there will also be a surcharge where it’s your second property.” Guarantor mortgages are another option if you want to maximise the stamp duty breaks, but they come with a major catch.
“With these, a family member will guarantee to pay the mortgage if any payments are missed,” says Coles. “It’s a major undertaking for the guarantor and isn’t right for everyone.”
It’s far from the snappiest title, but joint borrower sole proprietor mortgages are another option for parents that want to help.
“These allow parents to be named on the mortgage to boost affordability while the child remains the sole legal owner,” explains Nicholas Mendes, mortgage technical manager at John Charcol. “This lets first-time buyers benefit from stamp duty relief while the parents’ incomes help meet lender affordability calculations.”
Another spin on this is a family mortgage, where a parent uses their savings to help.
Coles explains: “These might offset family savings, so less interest is due, or let you use your savings as a 10% deposit, which is returned, with interest, after three or five years, providing mortgage payments are up-to-date.”
The time you spend with your adult children can be a valuable time to instil some solid financial habits. Just because they are your children, it doesn’t mean they can’t contribute to the household.
While getting them to do their own laundry or cooking the occasional family meal might be a no-brainer, the decision over whether or not you charge rent is a trickier one. Asking your children to pay rent might give them some responsibility and help with their budgeting skills, but it won’t help them save for their deposit.
However, there is a workaround. Mendes says that some families create ‘rent contracts’. “They might charge nominal rent but secretly bank it all to return as a deposit gift later,” he explains. If you’re worried that they show no sign of moving out, it might be time to be firm with them.
Loydon suggests setting a date by which they need to move out. “This should be the goal, but do support them with a plan to ensure they’re able to,” she says. “Downsizing, if it’s part of your plans, can help them make their own arrangements too. And, if all else fails, cancel the wi-fi.”
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