Quarter of parents would charge interest on home loan to children
Recent research has revealed that 25.6% of parents would charge interest on a home loan made to their children.
According to UOWN, which surveyed 2,500 parents in Britain to gain a better idea of ‘the Bank of Mum and Dad’, a quarter admitted that they would charge interest on a loan to help their children access the housing ladder.
It also revealed that of the 25.6% who would charge interest, the average rate was 4.3%, with the highest rate recorded at 4.78% in Greater London.
At the other end of the spectrum, the North East was home to the most competitive rates, where the average was recorded at 3.66%.
Commenting on the findings was founder at UOWN, Shaan Ahmed, who highlighted that whilst familial interest rates may be high, obtaining a loan from parents may be the only option for many first-time buyers when it comes to accessing the housing ladder.
“Whilst the bank of Mum and Dad does have some of the highest interest rate payments out there, it may be the only piece of finance that you can get – all the other banks want to know your income, your assets, whereas for the Bank of Mum and Dad just the simple fact you need a helping hand, which they can lend, is enough (having the same DNA also helps!).
“Millennials today are facing pressures that haven’t been seen before, so it’s no surprise that parents want to help their children onto the property ladder. Ultimately the ‘Bank of Mum and Dad’ is a testament to parents’ generosity and love across the country, but we need to bear in mind that parents face financial pressures just like everyone else, and therefore need a return on their investments. It’s advisable to establish at the outset whether the money being given out is a gift or a loan, and it’s also sensible to reach out for impartial advice that will help your family find the most suitable arrangement.”
Detailed statistics can be found at the link below: