More parents are now paying their adult children’s mortgages as rising interest rates pile the pressure on young homeowners, new research has found.
While in the past, the “bank of mum and dad” would have tended to help with things like house deposits, spiralling inflation and rising interest rates have meant almost four-fifths of parents are now stepping in to financially support adult children with everyday costs. Of those, 25 per cent are helping with mortgage payments.
Mike Stimpson, a partner at Saltus, a wealth management company that compiled the findings, said: “Our research shows just how much financial support adult children need in the current climate, and the lengths to which their parents are prepared to go to help them.
“Our research shows one in four parents who are helping their children are doing so specifically to help with rising mortgage costs, and that one in five have reduced their own pension contributions to provide that financial support to their children.”
The findings come after the Bank of England increased base rates from 4.5 per cent to 5 per cent last week, the 13th consecutive rise since 2021.
The continued rise in rates has left people struggling to meet their mortgage costs, with Chancellor Jeremy Hunt announcing on Friday that UK banks have agreed to wait at least 12 months before repossessing the homes of borrowers who fall behind on payments.
As part of the announcement, Hunt also said borrowers will be allowed to temporarily change their mortgage terms, for example by switching to an interest-only deal for six months, without damaging their credit ratings.
Luke Thompson, a partner at PAB Wealth Management, said of the changes announced by Hunt: “This will potentially offer some respite to borrowers.
“However, seeing as the large majority of monthly payments for those on repayment mortgages is made up of interest, especially in the early years, it will not give as much assistance as some may have thought it would.”
He added: “In addition for those who have fixed their rate at a high rate now, the same issue will still be there for them in six months’ time.”
The Saltus research report surveyed more than 2,000 people in the UK with investable assets of £250,000 or more.
