54% of parents return rent paid by adult children to help save for a deposit

More than half of parents who charge their adult children rent are putting some or all of the money towards helping their child save to buy their own home, a survey indicates.

Parents charge their adult children living at home around £303 per month on average in rent, equating to more than £3,630 a year, Nationwide Building Society said.

Rent turned into savings

According to the survey of more than 2,000 UK parents with adult children living at home and paying rent, 54% return some or all of the rent paid by their children to support their homeownership ambitions, turning rent into savings for a deposit.

Many parents are also providing additional flexibility to their children. More than two-fifths (45%) of parents said they have waived rent payments for their child once in the past year, while more than half (52%) said they have let children off rent payments between two and six times in the past 12 months.

Parents' support tactics

Carlo Pileggi, Nationwide’s head of mortgage products, said: “Behind many first-time buyer success stories are parents quietly helping along the way and it appears they are using new tactics to support their children.

“As saving for a home remains as challenging as ever, our research shows many of Britain’s parents are using rent payments as a way to help their children build a deposit, turning the family home and time spent living at home into a stepping stone towards homeownership.

“However, the findings also serve as a reminder that many aspiring first-time buyers do not have access to family support and continue to face significant challenges in saving for a deposit.”

Financial arrangements and tensions

Arrangements are not always straightforward, with half (50%) of parents saying financial arrangements with their adult child have led to tension or disagreements, according to the survey carried out by Censuswide in July and August among more than 2,000 parents across the UK with adult children living at home who pay rent.

Aneisha Beveridge, research director at Connells Group, said: “For many young adults, living at home has become one of the few effective ways to build up a deposit.

“Even when they’re contributing towards household costs, they’re often able to save far more than they would if they were renting independently.

“Rising rents and broader cost-of-living pressures mean that putting aside enough money for a deposit has become increasingly challenging.

“Rent now absorbs a large share of many young adults’ incomes, leaving little room to build meaningful savings.

“As a result, more parents are finding ways to support their children, whether that’s charging a modest rent and returning it later as a lump sum, or simply providing a more affordable place to live while they save.

“While not everyone has access to this kind of family support, staying at home for longer can put would-be first-time buyers in a much stronger financial position in the long term.

“For many, it’s become less of a lifestyle choice and more of a practical stepping stone onto the housing ladder.”

Ian Harris, president of NAEA (National Association of Estate Agents) Propertymark said: “Where an adult child is paying rent, even informal family arrangements can become complicated.

“Being clear about rent, bills, responsibilities and what happens when circumstances change can help avoid misunderstandings and financial tensions.”

Katie Horne, banks relationship manager at Flagstone, said: “High-interest savings accounts increase the value of that rental income and help your child to appreciate the power of compounding interest, even over what might be a relatively short period of time.”