Bank of Mum and Dad wants their money back

In Yorkshire, 92 per cent of families who help their first time buyer
relatives with loans also ask for interest payments

More than half of family members that give money to first time
buyers expect to get it back, with three quarters wanting to be
paid interest on top, according to figures from the HSBC.

Almost one in five first time buyers received family financing in the last year and 52 per cent of family members who offered financial assistance provided it with an expectation to be paid back. 

Around 31 per cent gave outright cash gifts as the primary source of family financing, and 17 per cent requested part-ownership in the property in order to collect their money when the house is eventually sold on. 

The survey showed 73 per cent want to be paid interest as well, the most common rate ranging between 2.1 per cent and 2.5 per cent, around the current rate of inflation. Women are slightly less likely to be asked to pay interest than men, (70 per cent against 77 per cent).

Around England, in the South East, 56 per cent of families want interest to be paid on any financial assistance with that figure rising in London to 77 per cent. In Yorkshire, 92 per cent of families request interest, as do 94 per cent of families in the North West.

More than 8 out of 10 families lending to a first time buyer purchasing a detached house expect to receive interest, compared with 72 per cent of those buying a semi-detached house, and 63 per cent of those purchasing a terraced property. 

"Family support has become an important part of the first-time buyer financing mix, however the research shows that many relatives would like to be repaid at a later date," said Peter Dockar, Head of Mortgages at HSBC. "To avoid unnecessary strain on relations further down the line it is best to agree the terms with family members at the outset."

Savills has also been crunching the Bank of Mum and Dad numbers and conclude that the extent of financial assistance provided to first time buyers has been between two and three times higher in the last five years compared to the five years before the credit crunch.

So while first time buyer numbers are down, the deposit they have to put down has risen as has the proportion of buyers receiving assistance from 31 per cent in spring 2005, to 65 per cent post crunch.

Working on the basis that in cases where parental assistance was provided it funded the whole deposit, Savills estimates that the amount of financial assistance from the Bank of Mum and Dad in the five years post credit crunch would have been 131 per cent higher than in the previous five years (£18.5 billion as opposed to 8 billion).

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