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Funding your child's first steps onto the property ladder

30 October 2017Fixed incomeEquities
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Funding your child's first steps onto the property ladder

  • 2017 studies show that those aged under 35 earn less than their parents and therefore struggle buying their own home
  • The benefits of helping your child onto the property ladder could go beyond gifting an initial deposit

According to a 2017 study1 by The Local Government Association, one in seven UK tenants spend over half of their income on rent. To put that into context, that suggests that just 2% of homeowners repay over the same proportion of their salary towards a mortgage.

Money obligations and its effect on life decisions

According to the BBC, as of January 2017 under 35s have become the first generation to command a significantly lower income than their parents2, and as such, are seemingly struggling to buy property in a tough housing market. On top of that, The Local Government Association also say that the average deposit now costs 71% of a first-time buyer's annual income1, and so many are taking on demanding debt2 obligations – something which could lead to other issues – according to Citizens Advice.

Research carried out by Citizens Advice in 20163 suggests that unmanageable debt is likely to halt major life decisions. For instance, 49% say they are less likely to start a business (compared to 33% with manageable debt), while 34% say it makes them less likely to relocate (vs. 25%).

In the same study, 28% said soaring debt made them less likely to change jobs (compared to 19%) – something which could affect career progression.

Experiences can improve quality of life

Those unsaddled by rent are often able to use their income towards other goals – whether it may be saving for the future, exploring a new business venture or travelling the world.

The 'experience economy' appears important to the millennial generation, with the Office for National Statistics reporting that in 2016 that the average household is spending less on material items, and more on recreation and culture4 compared to previous years.

Giving your child the best start to adult life

Aside from helping your child break free from the traps of renting, the benefits of investing in property could include further income through letting the property yourself, or potentially making a profit when selling.

According to research by Legal & General in 2017, UK parents are helping their children to get onto the property ladder now more than ever, and are expected to have collectively lent out £6.5bn5 this year.

If you're hoping to support your children financially when purchasing their first home, be aware that it may be a time-consuming process requiring a great deal of planning. To help you make this step when the time comes, a tailored portfolio of investments could be a great way to build up a solid deposit fund. For advice on how to further tailor or diversify your investments, our Relationship Managers are on hand.

Citi Relationship Manager Christopher Paris says, "It is always rewarding to educate investors, however experienced, and help them grow their assets for the long term and achieve their goals. In many cases, the education is not always about a product or markets but the different structures available."

"A client of mine has recently said, "I should have done this years ago, I wish someone told me about this sooner"", says Christopher.

For current Citigold customers, our partners Charles Cameron & Associates (see under Professional Services), who are independent experts in mortgage advice, are available to offer information and assistance for first-time buyers, home-movers and re-mortgagers.

If helping your children with their future property is a priority, enhance your wealth journey with an investment plan tailored to you from Citigold.


1 https://www.theguardian.com/money/2017/jul/03/one-in-seven-private-tenants-pays-more-than-half-income-in-rent-study-finds

2 http://www.bbc.co.uk/news/business-38558116

3 https://www.citizensadvice.org.uk/Global/CitizensAdvice/Debt%20and%20Money%20Publications/The%20Debt%20Effect.pdf

4 https://www.theguardian.com/business/2016/may/06/the-way-we-shop-now-the-revolution-in-british-spending-habits

5 https://www.theguardian.com/business/2017/may/02/bank-of-mum-and-dad-lend-65bn-property-market

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