Rising numbers of adult children living at home are adding to the financial pressure on older homeowners saving for retirement and clearing their own mortgage, Key Equity Release says.
The total annual cost of adult children living at home could be as much as £17 billion if parents do not charge rent, it is estimated, with parents aged between 54 and 62 most likely to have adult children living at home.
Government data shows more than 3.8 million families have adult children living at home – around one in four in England and Wales - with 4.9 million adult children still in their parents homes. Around one in four (23%) parents have adult children living with them who had previously left home.
Additional costs for parents with adult children at home are estimated at around £3,400 a year from food and use of utilities adding up to as much as £17 billion for all households if parents do not ask for any contribution in rent or towards costs.
Key notes that many adult children act as carers for older parents with government data showing one in four are unpaid carers, but urges older homeowners to think carefully about the potential costs and the solution which could include helping adult children on to the property ladder on their own.
Adult children living at home are mainly men (61%) and are more likely to be living in London where 27% of families having adult children living at home. Households with a lone parent are also more likely to have adult children living at home at 46%.
Key believes later life lending solutions such as lifetime mortgages can help the over 55s manage the cost implications when adult children move back into the family home, as well as allowing them to provide the financial support to ultimately mean children can move out on their own.
Will Hale, CEO of Key Equity Release, said: “Adult children living at home is a long-term trend across the UK with the recent tough jobs market for graduates and rising rent costs as well as the struggle to raise deposits for mortgages and meet lender affordability requirements adding further pressure.
“Parents inevitably want to help out children and that is demonstrated by the numbers of adult children returning to live in the family home. Helping children can come at a cost however and parents need to consider their own financial situation.
“They are most likely to face the added financial costs of adult children living at home at a time in their lives when they are looking to pay off their mortgage and maximise pension saving for their own retirement.
“Many over-55s homeowners will have substantial property wealth which they can put to use easing the immediate financial pressure resulting from a child returning to live at home which may include using equity release to pay off their own mortgage so reducing monthly outgoings.
“Products such as modern lifetime mortgages can also be used to make gifts to help adult children with deposits so they can eventually move out and begin their own home ownership journey.
As always, specialist advice is critical to ensure all appropriate options are considered and that any assistance provided for children does not compromise the customer’s own financial resilience.”
