Grandparents have used money tied up in their homes to gift almost £1 million a day to younger family members for house deposits during the stamp duty holiday which ends on 30th June. Since the tax break started on 8th July last year the ‘bank of Gran and Grandad’ has gifted deposits averaging £50,000 each and totalling £323.9 million so far.
The gifts have been mostly funded through equity release mortgages which are available for the over-55s. An equity release mortgage often has no monthly repayments and can be paid off by the sale of your property when you die or move into care.
Since the Chancellor Rishi Sunak scrapped stamp duty on the first £500,000 of a property price, the market has gone into overdrive. Rightmove recently reported more than 700,000 homes currently sold subject to contract which is the highest number recorded in a decade.
With many forced to spend more time at home due to the pandemic, home renovations have also soared. This week Legal & General reported a 134% year on year rise in inquiries in the first 6 months of 2021 from borrowers looking to unlock equity for home improvements.
House deposit gifts were at their highest in September last year at £40.6 million and hit a low of £13.16 million in February, as the original stamp duty deadline of 31st March approached.
Andrew Cross from Arcus said;
‘It’s totally understandable that grandparents want to make the most of the stamp duty holiday and give their families a cash gift to put into property. However, it’s important to remember that equity release mortgages don’t always offer the full market value for your home and can also charge hefty fees for arranging. They can also affect your entitlement to means-tested benefits, so it’s important to also consider your own needs in later life in order not to leave yourself financially vulnerable in retirement.’