Research from Key Equity Release has demonstrated a significant force at work in the housing market. Older homeowners paid out around £775 million in gifts over 2020, providing their younger relatives with a means of getting that deposit together and climbing onto the housing ladder.

On average, homeowners gifted around £42,500 to their younger relatives, in many cases meeting the cost of the deposit outright. Among the most popular means of getting the money was through equity release. Around £3.4 billion in property wealth was released last year, of which around £755 million was used for gifts.

The looming end of the stamp duty holiday (which at the time of research was due to end on the 31^st of March) was a major motivating factor for many. 43% of gifts, according to the researchers, were used for housing deposits, compared with around 26% for early inheritance.

Key’s CEO, Will Hale, was quick to point to the upside of gifting from one generation to the next. “For many people, these gifts will have been the enabler to them buying their first home and is a perfect example of how intergenerational wealth transfer can deliver positive societal benefits. The stamp duty holiday has certainly been a catalyst for more activity in this area but helping family is always a major motivation for older homeowners exploring their equity release options.

What makes London Different?

When it comes to property, London is a special case. The average deposit for a first-time buyer is a whopping £130,357 in the capital, which is more than double the next nearest regional rival (the South East, which sits on £64,910). When you compare it to other regions of the UK, the difference becomes even starker: In Northern Ireland and the North East, the average deposit is less than £30,000.

Of course, the average gift for a house deposit is more-or-less proportionally higher in London, which helps to make up the difference. In the capital, the average gift sits at £102,826. This is helped by the fact that there is around £128 billion in equity owned in homes outright by people aged over sixty-five (this according to previous research by Key).

Much depends on whether working from home becomes a permanent characteristic of the British economy, and to what extent. Many Londoners have elected to make the switch to out-of-town living, with a view to a few longer commutes when the visit the office once or twice a week.

Equity release can be a tricky business, and it’s not appropriate for everyone. Hale says: “…it is vitally important that homeowners get specialist advice if they do decide to use some of the value tied up in their home to help their families. Balancing generosity with their own financial security is vital and a good adviser will help them explore all their options.”