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Low deposits ease strain on Bank of Mum & Dad

MORE parents are taking on large debts or dipping into their life savings so that they can help young adults buy their first home − and the average amount borrowed from the Bank of Mum and Dad is now a hefty £18,505.

These findings − based on responses from 500 parents* − prompt a timely reminder to first-time buyers and their families about the benefits of low-cost shared ownership.

Bromford Homes Head of Sales Alan Bradley highlights shared ownership's low deposits and affordable monthly costs as a much more affordable alternative to the traditional outright home sale.

SO parents and daughter

"My advice to first-time buyers − and their parents − is simple. Take a good look at shared ownership before you make any commitments and you could be pleasantly surprised by how affordable it is," says Alan.

"We know from experience with hundreds of first-time buyers that many of them turn to their parents for help with the deposit. The £18,505 family loan quoted in the study is of course distorted by very high property values in London and the South East but it does give us a general sense of the burden being shouldered by typical families.

"With shared ownership, the deposit is a much more affordable figure − around £3,750 for the average Bromford homebuyer in central England.

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"The desire among young adults to own their own home remains strong despite high open market prices and, of course, many parents are keen to help them achieve the same ownership dream that they enjoy.

"But this new study confirms that, in many cases, parents are having to make big financial sacrifices in order to help their children step onto the property ladder. Some are forced to remortgage their own home and more than one in 10 say they have cashed in their investments. Two-thirds say their children could not have done it without their help and, tellingly, some admit helping out has caused them financial hardship.

"Shared ownership offers a different and more affordable solution to the problem. Instead of buying outright, you buy a share of your new home − 40% or thereabouts is typical − and pay low rent on the remaining share.

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"Young homebuyers can always increase the share they own when they've saved more money or their earning power improves. In the meantime, they've taken that crucial first step on the property ladder without stretching their finances − or those of their parents."

To find out more about shared ownership and how it works, we've captured one couple's story on video (pictured below) and prepared a special Q&A for parents.

LarksRise Matt&Clare alt

Our expert advisors are ready to answer your questions on 0845 60 10 878 and you can visit our demo home at Oaklands, Rugby, five days a week (Thursday-Monday from 10.30am to 4.30pm). Homebuyers can also get regular updates by following us on Twitter and Facebook.

* The research, commissioned by law firm Slater & Gordon, was based on responses from more than 500 parents who had helped their children buy a home. More about study in this Daily Telegraph property story.

07 January 2015