Families are forecasted to contribute a record £9.2 billion this year to help their relatives buy homes, driven by rising rents and higher mortgage costs that are escalating the challenges of property ownership.

This represents an increase from the £8.1 billion gifted by parents, grandparents, and other family members last year. The average family contribution is expected to rise to £27,400, up from £25,600 in 2023, according to research conducted by Legal & General and the Centre for Economics and Business Research.

Family financial support is anticipated to account for 42 percent of all properties purchased by buyers under the age of 55 this year. With affordability pressures growing, these gifts are projected to reach £11.3 billion by 2026.

The findings highlight the financial strains caused by the housing crisis. A shortage of homes is driving up property prices, while increasing rents and the higher cost of living make it harder for potential buyers to save for deposits. According to the Office for National Statistics, average private rents in Britain rose by 8.6 percent in the 12 months to the end of July, close to the record pace of 9.2 percent noted in March.

Additionally, mortgage costs have risen since the Bank of England began to rapidly increase its base interest rate from a historic low of 0.1 percent at the end of 2021 to a 16-year high of 5.25 percent. While the base rate was recently reduced to 5 percent, home loans remain more expensive than they were three years ago. Consequently, prospective buyers find a larger deposit more desirable as it typically leads to lower mortgage rates from lenders.

Bernie Hickman, head of L&G’s retail business, indicated that people are making “tough decisions” in this financial landscape.

The research, which surveyed 2,506 borrowers and 2,017 parents and grandparents, revealed that cash savings and ISAs are the most common sources of funds families use to help relatives buy properties. However, 12 percent reported using pension savings, 12 percent from downsizing, and 4 percent from remortgaging.

Potential buyers are also reducing pension contributions to save for deposits, with 15 percent of recent and prospective property owners cutting back or stopping retirement savings, and 19 percent of first-time buyers doing the same, the study found.

Hickman highlighted that the research shows families across generations face difficult decisions as they strive to balance current aspirations with future needs. “We need to explore solutions that could help all generations achieve better financial security, enabling them to build savings and assets today while maintaining financial stability in later years,” he said.