Bank of Gran and Grandad

One consequence of the stamp duty holiday is a dramatic rise in contributions from the Bank of Gran and Grandad. New research has found that grandparents have gifted almost £1 million a day since the stamp duty holiday was introduced.

The data from equity release specialist Key found that older homeowners have gifted £323.9 million worth of housing equity since the start of the stamp duty holiday on 8th July 2020.

This gifted housing equity has gone towards helping younger family members buying their first homes or moving up the property ladder.

The data also shows that pay-outs for house deposits peaked last September at £40.6 million, before falling to £13.16 million in February, shortly before the original end of the stamp duty holiday, scheduled for 31st March.

Chancellor Rishi Sunak subsequently extended the stamp duty holiday in his Budget.

According to the research, the average amount gifted for house deposits was around £27 million a month, during the 11 months of the stamp duty holiday to date. This gifting level is equivalent to £51,595 per borrower.

The stamp duty holiday ended on 30th June, when the 0% rate threshold was reduced to £250,000, before being reduced again to its original £125,000 on 30th September.

First-time buyers will continue to pay no stamp duty the first £300,000 of the purchase price on homes costing up to £500,000.

Will Hale, CEO at Key, said:

“With the Stamp Duty Holiday giving people an unprecedented opportunity to climb onto the property ladder, the Bank of Gran and Grandad has stepped up to help finance it. This type of inter-generational generosity is more common than you think and even before this change, one in five equity release customers were using their housing equity to support younger family members.

“While the stamp duty holiday has undoubtedly stimulated some additional demand, we anticipate that older people will continue to want to provide this type of ‘living inheritance’ for years to come. A desire that it is even easier to fulfil with the flexible later life lending products that are available in today’s market. However, it is important that people’s generosity doesn’t leave them financially exposed and therefore, as always, specialist advice is vital so that all options are properly considered.

“With the ability to service interest, make ad hoc capital repayments and having the certainty of fixed early repayment charges, equity release can be an ideal solution to allow parents or grandparents to make these gifts while still having the flexibility to manage borrowing in line with their own changing circumstances.”