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Sunday, 20 April 2014

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North west’s bank of mum and dad most likely to take an interest

More than half of parents who offer financial help to their children to buy their first home expect to be paid back – and nearly three-quarters of them want interest – a study has found.

Just a third (31 per cent) of relatives offered cash as an outright “gift”, while almost a fifth said they had asked for part-ownership of the property to collect their money when the home was eventually sold on, HSBC said.

Its survey of 1,000 first-time buyers found that while around a fifth of them had received family finance in the last year, 52 per cent of parents expect to be paid back. Some 73 per cent of parents who do want their money back also expect interest, ranging from 2.1 per cent to 2.5 per cent on average, which is close to the current rate of inflation.

The typical size of a parental gift or loan varied widely, with first-time buyers aged up to their mid-20s receiving around £19,000 and those aged from their mid-30s upwards receiving more than £42,000 on average. Family help has played an increasingly vital role in helping people to raise the large deposits often needed to get on the property ladder, with a study from Yorkshire Building Society finding last week that it could take someone around eight years to save a typical £26,000 deposit.

Previous research for HSBC has found that first-time buyer sales worth £5.3bn would not have happened last year without help from the “bank of mum and dad”.

Women are slightly less likely to be asked to pay interest than men, and those buying alone are also less likely to be expected to pay interest, the latest study found. Families living in Yorkshire and the north west are particularly likely to want interest paid.

Peter Dockar, head of mortgages at HSBC, said it was best for families to agree terms at the outset for what they expect to happen after lending money, to avoid “unnecessary strain”.

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