63% of later life clients borrow to help family members

61% of intermediaries said their clients were concerned about striking the right balance between helping family members whilst planning for their own retirement and future, new research from Suffolk Building Society found.

Almost half (47%) of brokers said that raising money to help a family member is one of the most common reasons their clients require a mortgage in later life. 16% have also worked with older borrowers looking to be added to a mortgage to help a family member, such as through a joint borrower sole proprietor (JBSP) mortgage, collectively leading to almost two thirds (63%) of later life clients borrowing to help family.

The research also found that intergenerational lending, such as JBSP mortgages, isn’t an option widely known amongst clients. In 65% of JBSP cases, it is brokers who are suggesting this type of mortgage. Clients themselves requested it in only 9% of cases.  

Charlotte Grimshaw, head of intermediaries at Suffolk Building Society, said: “Brokers have an important role to play in helping borrowers consider the wider implications and what options are available for providing financial support to adult children.

“Affordability is seen as the main hurdle for first-time buyers. Helping to boost affordability by taking the income of multiple family members into account through JBSP can help people get onto the property ladder. Alternatively, gifting savings or raising money against their home to then gift to their children is another option. Brokers can discuss how this may affect their own longer-term priorities, from maintaining the lifestyle they had planned for retirement to retaining enough financial flexibility for unexpected events – as well as how gifting can affect inheritance tax. 
 
“It may even be helpful to combine both options. But it all starts with a chat. This is the first step towards providing meaningful support, without necessarily compromising on the client’s financial comfort or future plans.

“Many first-time buyers have written off their chance of homeownership before they’ve spoken to anyone. Understandably, the gap between house prices and earnings is seen as the biggest challenge by many. However, from JBSP mortgages to rental track record lending, the mortgage market has responded with innovative solutions designed to help with the affordability challenges.

“There are now more ways for families to work together to help each other get onto the property ladder. We now need to get that message across to both first-time buyers and their families.

“Our research shows that brokers are crucial in ensuring borrowers are aware of, and understand, these options. While intermediaries have particular importance for first-time buyers, more experienced homeowners can learn just as much, such as how JBSP mortgages can help them support loved ones, whilst avoiding extra property taxes like stamp duty surcharge or capital gains tax. We’ve also seen first hand the lifeline it provides family members supporting during a divorce or separation in later life.

“Since we introduced our JBSP mortgages almost two years ago, they have accounted for 10% of applications, and brokers have played a big part in this, providing another solution for generations to pool resources in a way that goes beyond simply ‘gifting’ money.”