I have worked with many parents buying properties for their children, ranging in age from just four years old to grown-up children in their twenties and thirties.
Of the buyers my buying agency represents, almost a third of transactions up to £5 million are financed by the Bank of Mum and Dad.
New research by Savills estate agency indicates that parents and grandparents paid out a record £9.6 billion in gifts and loans during 2024, facilitating just over half of all first-time buyer purchases.
Five years ago it was common for parents to gift their grown-up child a respectable cash deposit, with the child typically then securing a mortgage for the remaining amount and the parent acting as guarantor if required.
This helped them not only access properties that would otherwise be out of reach, but also benefit from more affordable mortgage repayment terms. Often the grown-up child would rent any spare bedrooms to friends to cover the mortgage and expenses.
Now a big upcoming change to the way pensions are taxed is encouraging parents to give substantially more to fund property purchases — and to do it even earlier.
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A record £9.6bn was gifted or loaned by parents and grandparents in 2024 to help younger generations step onto the property ladder
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At present inheritance tax doesn’t usually apply to pension pots, making them a tax-efficient way to pass cash down to younger generations. But changes announced in last year’s autumn budget mean that from April 2027 unused pensions will form part of one’s taxable estate and it will no longer be possible to pass that money down tax-free.
Parents’ mindsets have noticeably shifted and, as part of their inheritance planning, more are now opting to live off their pensions and instead pass significant wealth on to children and grandchildren through property, often while they themselves are only in their sixties and early seventies. They are doing this early to have the best chance of beating the seven-year rule, whereby gifts given more than seven years prior to death are not subject to inheritance tax.
• Bank of Mum and Dad gives an average £55k to buy a home
Bank of Mum and Dad budgets have risen significantly as a result. We have recently helped parents and their grown-up children acquire properties including a house in Putney, southwest London, for just over £5 million, a bachelor pad in Chelsea, west London, for just over £4 million, and an apartment in Notting Hill, west London, for £6 million — all paid in full by parents keen to pass on family wealth.
For most of the parents we work with, their main concern is the risk of their grown-up child’s relationship breaking down or them meeting a partner who tries to take advantage financially. Where large sums of money are involved, particularly if the child isn’t yet settled, this can feel like a risk. But parents can be reassured that in recent years it has become more socially acceptable to have cohabitation and prenuptial agreements in place to ensure no one else can claim a stake in the property.
• I wish I had the Bank of Mum and Dad to help keep me afloat
They are also anxious to ensure their child buys wisely and their interests are protected. We worked with one music entrepreneur’s daughter looking for a new-build penthouse in King’s Cross, north London, who found that nobody was taking her seriously. We stepped in to ensure her interests were protected and she bought well.
With gifting becoming more strategic, and with legal safeguards now more common, we’re seeing a fundamental change in how wealth is being transferred across generations, a trend that will only continue to grow as these inheritance tax changes come into force and families adapt to the new status quo.
Jo Eccles is founder and managing director of Eccord, a property search company representing individuals and families looking to buy or rent in prime central London
