Low savings rates make help harder for parents
Friday 02 August 2013
Returns from cash savings are crushing parents' hopes of helping their children to get a foot on the housing ladder, as interest rates are outstripped by house prices over the long term.
Almost half of the parents helping their children to buy their first property are using cash savings.
But analysis from financial services firm Castle Trust has revealed that to keep pace with house prices, as measured by the Halifax House Price Index over the past 10 years, savers would have to find dramatically better rates.
The average return across the top five instant-access savings accounts with a minimum of £1,000 or less is 1.6 per cent Gross AER, but a higher-rate taxpayer would have needed 4.3% gross AER on their cash savings just to match property price rises. The return for a basic-rate tax payer would have needed to be 3.2% Gross AER.
A further 32% of parents plan to raid their stock market-based investments, a quarter (26 per cent) will use JISAs and Child Trust Funds and about 19 per cent intend to cut back on certain aspects of their lifestyles in order to help their children get on to the property ladder.
However, despite the average cash injection now coming in at £16,300 for a first home, almost three-quarters (73 per cent) of parents don't expect their offspring to ever pay back the generous contribution.
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