According to research released by Key, nearly half of over 55’s that loan money to adult children want to make sure that the money is not squandered and that grandchildren benefit as well. It seems the bank of Mum and Dad are getting tough with the terms and conditions when helping their children get onto the property ladder and they are definitely tightening up their lending terms as a result.
As high as 36% said they will discuss with their children what the money is to be used for before agreeing to lend it, with around 22% setting specific rules on how the cash is spent. A further 14% also insist that their children seek independent financial advice on how to either invest or spend the money. Only one in five homeowners aged 55-plus said they don’t mind how their kids spend the money.
Around 46% of older homeowners have already helped their children out with unsecured loans worth more than an average of £5,000, with a further 30% planning to lend around the same £5,000 amount. Some have been extremely generous with 11% lending more than £20,000.
However, in helping their children some parents are having to cut back with 1 in 6 claiming that it has already hit their own personal finances and a whopping 78% worried about the future financial implications
CEO at Key, Will Hale said: “The Bank of Mum and Dad is firmly established as a part of the mainstream UK lending market and more and more parents are banking on helping children if they can afford to.
“However, as with any other lender, they have to set limits on how much they can afford to lend and on what the money is used for. Stipulating that children should receive financial advice is a sensible move as good advice is key to making sensible financial decisions. That applies to parents too, as they should not lend money without considering the short, medium and long-term financial implications for themselves.”