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UK parents will lend a whopping £5bn to their children this year in order to help them take the notoriously difficult first step on to the property ladder. 25% of all mortgage transactions in the UK in 2016 will be partially financed by parents with an average contribution of £17,500. Over the course of the year parents will contribute to the purchase of over 300,000 homes worth a total of £77bn.
The figures, released this week by Legal & General (L&G), mean that, if it was formalised into a business, the so-called Bank of Mum and Dad would be one of the top ten mortgage lenders in the country!
Of course the recipients of these generous gifts are the lucky ones but the facts highlight a major problem with the property market in the UK. Those not fortunate to be born into such wealthy families face a widening gulf between salaries and house prices which in many cases puts home ownership firmly out of their reach. Average house prices in the UK increased by 7.7% last year to November 2015 compared to wage growth of just 2.4%. As a result of this disparity 20-39 year olds have been dubbed ‘generation rent’. It is predicted that by 2025 only 26% of this demographic will live in a home they own, compared to 38% today.
A spokesman for L&G called for action to rectify the issue by increasing the supply of housing to enable demand to be met at prices more in synch with wages, but solutions of this magnitude take time. So if you don’t fancy being a renter for life and you aren’t likely to receive a substantial sum from your parents to put down as a deposit on a house, what are your options?
The only solution is to save. While the prospect of saving 10% of the value of a home can be daunting, it is doable. You have a very clear goal to aim for, which is often half the battle. In order to achieve it you will need to be disciplined and prioritise saving. As Warren Buffet has famously said ‘Do not save what is left after spending, but spend what is left after saving.’
Setting up a regular payment as soon as your salary comes in is a sensible move but where do you put the money? It is crucial to make the most of every penny that you save and that means looking at options other than a simple bank deposit, which won’t be growing your money very fast at current rates of interest. Infinity offer bespoke savings programmes tailored to your specific requirements with the best regular savings products on the market. Having some structure in place as well as a professional financial planner with experience to encourage you and keep you on track can be invaluable in helping you to achieve your objective of homeownership in the least possible time. Why not make an appointment with one of our experts and start the ball rolling?
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