Growing reliance on family wealth to help people buy a home is putting pressure on parents' finances and could weaken retirement security, according to a new report from Leeds Building Society.
The report shows that home ownership remains an important foundation for long-term security, but that achieving it is increasingly difficult: just 18% of aspiring homeowners say they definitely expect to buy, while 38% of those who expect to do so anticipate being aged 40 or older. 46% say they would use pension savings for a deposit if it were permitted.
Across generations, housing is increasingly being asked to do several jobs at once: provide a home, build wealth, fund retirement and make it possible to financially support family members.
47% of aspiring homeowners do not expect ever to own a home and 51% have received no family support. Among aspiring buyers whose parents own their home, 61% expect to buy, compared with 42% of those whose parents do not. In addition, 62% of people already providing financial support to family believe parents are now expected to help their children onto the housing ladder.
Of those supporting, or expecting to support, both younger and older generations, 78% say it puts pressure on their finances and 47% worry it could weaken their retirement security. To support younger relatives, 19% have used retirement savings, 18% have delayed saving for retirement and 13% have reduced pension contributions.
58% of homeowners say housing wealth is essential or very important to their retirement plans, while 80% of homeowners aged 25 to 34 expect it to contribute to retirement income. Yet only 56% of all aspiring and current homeowners feel confident they will have enough money to enjoy retirement, and 44% of 18 to 34-year-olds identify housing costs as a retirement concern, compared with 20% of 55 to 64-year-olds.
The research follows a recent speech by the FCA's director of retail banking, Emad Aladhal, who described housing as the potential 'fourth pillar of retirement'. Leeds is calling for policy, regulation and industry innovation to better reflect the way housing, savings, work, family support and retirement interact over the course of people’s lives.
Annette Barnes, CEO of Leeds Building Society, said: “Our research shows that decisions around housing, savings, and retirement are becoming increasingly interconnected, with many people seeing home ownership as a route to financial security. Families that own homes today are stretching their own finances to support loved ones and are passing on the opportunities that home ownership gave them, and yet, not everyone feels confident that they can get onto the housing ladder, which poses broader questions for society in the future.
“We hope this research adds to the important debates happening about economic security across people’s lives. At Leeds Building Society, we’re working hard to reduce the barriers to entry within the housing market, ensuring we have products available to help those without family support, whilst also considering how we support members whose housing wealth is increasingly becoming a part of their retirement planning.”
