Buying your first home has never been more challenging. With average house prices now more than eight times average earnings, the gap between what first-time buyers can save and what they need as a deposit has widened. For many aspiring homeowners, the difference is being bridged by gifted deposits, i.e. family contributions that make stepping on to the property ladder possible sooner. Gifted deposits are now a defining feature of the housing market. This article explores how gifted deposits work, how common they are, the average amounts involved, and what both buyers and their families should consider when navigating this increasingly important route to home ownership.
What Exactly Is a Gifted Deposit?
A gifted deposit is money provided - typically by parents, grandparents or close family - to help a buyer fund their house purchase. Crucially, as it is a gift, not a loan, and there is no legal expectation of repayment.
Lenders will usually require a formal gift letter confirming that the donor has no financial stake in the property and expects no repayment. Without such confirmation, the contribution may be treated as a loan, potentially complicating mortgage approval.
For first-time buyers, a gifted deposit can be transformative. It makes a mortgage deal possible and potentially reduces the size of the mortgage required, making better mortgage deals accessible.
How Common Are Gifted Deposits?
The practice of families stepping in to help is no longer an exception; it is increasingly the rule. Recent statistics show that nearly 31% of buyers received a gift or loan from family or friends to help with their deposit. Savills estimates that, in 2024, the so-called “Bank of Mum and Dad” contributed an astonishing £9.6 billion to help around 173,500 first-time buyers, representing 52% of all such buyers during that year.
Put differently, over half of new homeowners wouldn’t have crossed the threshold without direct financial help from family. This trend represents a significant cultural and economic shift. In 2015–16, just under a third of first-time buyers received family help. Today, it has become the majority experience, reshaping how and when people are able to buy their first homes.
How Much Do Families Typically Contribute?
Gifted deposits are not token gestures. They often make up a significant chunk of the required deposit. Researchers found that, in 2024, buyers under the age of 55 who received help were, on average, given £27,400 toward their deposit.
For some, this covers the difference between being able to buy a property or continuing to rent indefinitely. The size of contributions varies widely, depending on family wealth, location and property price. In London and the South East, where deposits are substantially higher, gifts can reach six figures. In more affordable regions, smaller contributions may still be enough to bridge the gap.
Regional Differences in Deposit Requirements
To put gifted deposits into context, it is useful to look at average deposit requirements across the UK. According to Unbiased, the average deposit for first-time buyers currently stands at:
• England: £68,154
• Wales: £34,476
• Scotland: £30,787
• Northern Ireland: £39,034.50
These figures demonstrate why family help is so crucial. In England, a deposit of nearly £70,000 is a formidable target, especially for younger buyers who may also be contending with student debt, rising rents and the cost-of-living squeeze.
Why Gifted Deposits Matter for Buyers
For first-time buyers, the advantages of a gifted deposit extend well beyond simply raising enough cash for the purchase.
• Improved Mortgage Deals: A larger deposit reduces the LTV ratio, often unlocking lower mortgage rates. For example, buyers with a 25% deposit generally access more favourable deals than those scraping together the minimum 5% or 10%.
• Reduced Long-Term Costs: A smaller mortgage means lower monthly payments and less interest paid over the lifetime of the loan
• Faster Market Entry: With house prices continuing to outpace wage growth, family support allows buyers to act sooner, before affordability gaps widen even further.
Considerations for Families Offering Help
While gifted deposits can be life-changing, they are not without challenges. Families should think carefully about:
• Financial Security: Parents must ensure that giving away a lump sum will not compromise their own retirement or financial resilience.
• Inheritance Planning: Significant gifts may have significant inheritance tax implications if the donor passes away within seven years of the transfer.
• Fairness Across Siblings: A gift to one child can create future tensions if other children are not treated equally.
It is always advisable for families to seek professional financial and legal advice before making large transfers.
Practical Steps for Buyers and Donors
- Gift Letter: Mortgage lenders require a written declaration that the money is a gift, not a loan.
- Deed of Trust: If parents want some protection (for example, if the child buys with a partner), a deed of trust can clarify ownership stakes.
- Budgeting Beyond the Deposit: Buyers must remember additional costs such as stamp duty, legal fees and survey costs.
- Exploring Alternatives: If a full gift isn’t possible, families might want to consider arrangements such as guarantor mortgages which allow them to provide support without having to transfer a significant amount of cash upfront as an outright gift.
The Broader Market Impact
The reliance on gifted deposits raises questions about “fairness” in the housing market. If over half of first-time buyers now require family help, what does this mean for those without such support? Critics argue that this entrenches inequality, privileging buyers from wealthier families while locking out others.
Policymakers, meanwhile, have introduced measures such as Lifetime ISAs, stamp duty relief for first-time buyers and shared ownership schemes to level the playing field to an extent.
Nevertheless, as long as property prices remain detached from average earnings, gifted deposits will likely remain a central feature of how the next generation secures their first homes.
Conclusion
For many first-time buyers, a gifted deposit is not just a helping hand, it is the deciding factor in whether home ownership is achievable at all. The data speaks for itself: 31% of buyers admit to using family help, more than half of all first-time buyers are supported by the Bank of Mum and Dad, and the average gift runs to tens of thousands of pounds.
As families continue to play such a pivotal role in the housing market, understanding how gifted deposits work, the risks they involve and the opportunities they create has never been more important. For those planning to buy their first home, whether you are saving independently or with family support, expert mortgage advice can also make the difference between delaying your purchase and getting the keys in hand.
FAQs
Q. What is a gifted deposit?
A. A gifted deposit is money given - usually by parents, grandparents, or close family - to help a buyer fund part or all of their house purchase deposit. It must be a gift, not a loan, with no expectation of repayment; otherwise, lenders may treat it differently.
Q. How common are gifted deposits for first-time buyers?
A. Quite common. According to the English Housing Survey 2023–24, 31% of buyers used a gift or loan from family or friends. Savills also found that in 2024, 52% of first-time buyers had help from the so-called “Bank of Mum and Dad.”
Q. How much money do families typically gift?
A. The size varies by region and property price. Which? reported that buyers under 55 who received help were given, on average, £27,400. In higher-cost areas like London, contributions can exceed £100,000.
Q. Does a gifted deposit affect mortgage approval?
A. Lenders require a signed gift letter confirming that the money is not a loan and carries no ownership rights. A gifted deposit can improve approval chances and potentially also give access to better mortgage rates by reducing the loan-to-value (LTV) ratio.
Q. Are there any tax implications for gifted deposits?
A. Potentially, yes. If the donor passes away within seven years of making a gift, the amount may be subject to some Inheritance Tax, depending on the value of the donor’s estate and timing. It is advisable for families to seek financial advice when gifting large sums.
Q. What alternatives exist if family cannot gift money?
A. Other routes include guarantor mortgages, Lifetime ISAs and shared ownership schemes. These options allow buyers to access the property ladder with less personal capital up front.
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